If a company has a successful business in its country, it is logical to expanding to another country. Most companies initially try to expand in their own region, but given the weight of the USA in global trade, it is only natural that, at some point, they will try to sell in the USA. In this article, I talk about why many foreign companies fail to establish a successful brand in the USA and what factors to consider for improving the chances of success.

Why do foreign companies fail?

Between 42% and 56% of foreign startups fail in their attempt to conquer the USA market. In our experience, the six topmost reasons are:

  1. Insufficient knowledge of the market
  2. No market need for your service/product
  3. Wrong distribution model
  4. Insufficient capital
  5. Failure to generate enough cash flow
  6. Inexperienced Team

The graph below weights the incidence of each of these factors in the reasons for failure.

companies fail reasons

Let’s address each of these issues.

Insufficient Knowledge of the Market: Insufficient knowledge of the market is a common mistake that can hinder success. To overcome this, foreign companies should invest in thorough market research and analysis. Partnering with local market experts or consultants can provide valuable insights into consumer preferences, market trends, competition, and regulatory requirements. This knowledge will enable foreign companies to tailor their strategies and offerings to meet the specific needs of the US market.

No Market Need for Your Service/Product: Failure to address a market need is a recipe for failure. Before entering the US market, foreign companies must ensure that there is a demand for their service or product. For instance, a European company that introduces a specialized tool for a niche industry in a market where similar tools are readily available may find limited interest. Conducting market validation exercises, such as surveys, focus groups, or pilot programs, can help gauge interest and gather feedback. Adjustments can then be made to align the offering with the needs and preferences of the US market.

Wrong Distribution Model: Choosing the wrong distribution model can hamper market penetration. It is essential to assess and select a distribution model that aligns with the target market and the nature of the product or service. Collaborating with specialized distribution and logistics partners can help foreign companies optimize their reach, ensure efficient logistics, and enhance customer accessibility.

Insufficient Capital: Insufficient capital is a significant stumbling block for foreign companies. It is crucial to have a comprehensive financial plan that takes into account all aspects of market entry, including initial investments, operational costs, marketing expenses, and contingencies. By securing sufficient capital through various means such as partnerships, investors, or loans, foreign companies can ensure a solid financial foundation for their US operations. Companies that offer specialized administrative services can be key in shedding light on this issue.

Failure to Generate Enough Cash Flow: Even with sufficient capital, foreign companies must generate enough cash flow to sustain operations and achieve profitability. Implementing effective sales and marketing strategies, building strong customer relationships, and continuously evaluating and optimizing pricing and revenue models are crucial to generating steady cash flow. Regular financial analysis and forecasting, like the ones provided by specialized administrative service companies, can help identify potential cash flow challenges and proactively address them.

Inexperienced Team: Having an inexperienced team can be detrimental to a foreign company’s success in the US market. It is vital to assemble a competent and knowledgeable team with experience in the target industry and familiarity with the US market. Outsourcing local specialists with expertise in sales, marketing, operations, and regulatory compliance can provide valuable insights and help navigate the complexities of the US business environment.

How Promoting USA can improve your chances of success

Promoting USA has assisted several foreign startup companies to initiate operation in the USA with a high success rate. You can see some testimonials  in our WEB page.

I hope this article has been helpful to you. I will continue to post information related to trade channel management, general economy and market trends. If you are interested in this article or want to learn more about Promoting USA, please subscribe to stay updated on future articles.

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