Believe it or not, when even the largest of high-tech companies enter new markets, global trade and expansion can overwhelm them. There are many factors to balance, and when these are combined with concerns about “unknowns,” already busy executives can often delay planning and evaluation. Even though 95% of the world's customers are outside of the United States, less than 1% of the 30 million businesses in the US export. This staggering comparison highlights the untapped business opportunities in new markets for high-tech companies.
Based on our experience partnering with high-tech companies (ranging from small startups to global manufacturers) on global expansion, I've developed some considerations to keep top-of-mind as you evaluate new markets.
1. Take advantage of local and global initiatives targeted at increasing trade.
As you evaluate a new market, consider current and upcoming Free Trade Agreements (FTAs). They are important tools to promote trade between countries by removing barriers and tariffs, and ultimately help companies of all sizes with global expansion. I also recommend connecting with the experts at the US Commercial Service (USCS), who are strategically located across the country and around the world for your convenience and access. The USCS is an excellent resource designed to help US companies navigate exports.
Don't forget to consider local trade initiatives sponsored by city or state entities. For example, here in Atlanta, there's a local export initiative that connects companies and organizations worldwide. Another example is Atlanta’s Global Commerce Council, which aims to provide support to local companies that conduct business internationally. These specific tools vary in each city and state. Your local Chamber of Commerce and the USCS are great starting points.
2. Re-evaluate your sourcing and logistics strategy based on your goals and growth targets.
While each company and high-tech product can require very specific sourcing strategies, most companies have in common the need to re-evaluate sourcing strategies when entering new markets. In the past, companies often evaluated their sourcing strategy based on cost alone. This is changing. Now we see companies evaluating sourcing strategies based on the needs of specific products and markets.
A changing high-tech mindset around sourcing strategies can also be seen in the findings from the most recent UPS Change in the (Supply) Chain survey. Findings from the survey of high-tech logistics decision-makers show that the adoption of near-shoring has almost tripled over the past few years, from 10% just a few years ago to 27% in 2013. This is evidence of a marketplace shift when it comes to views on sourcing strategies.
As you consider global expansion, it's important to take a look at your sourcing strategy to be sure it is evolving along with your company. Engaging a partner with experience managing complex, diverse supply chains from sourcing to assembly can be helpful in achieving success.
3. Prepare for new regulatory considerations at the outset to reduce headaches and risks of non-compliance later.
In an increasingly global marketplace, particularly for the far-reaching high-tech industry, the constantly changing and complex regulatory environment can be a headache for small businesses. Since regulations vary on a global, regional, and local scale for individual products, it can be a daunting challenge, but is a critical consideration when evaluating a new market for entry.
Another mindset shift we've seen with companies embracing global expansion is their approach to preparing for new regulations. A few years ago, companies were most concerned with meeting demand quickly in a new market, whereas now there is a growing strategic focus on understanding and complying with regulations prior to new market entry. By developing an understanding of regulations up-front, you can save time, stress, and unnecessary costs in the long run. When you engage logistics partners that have robust trade management and customs brokerage experience, along with deep local expertise, you can focus on your core products and business.
4. Don't go it alone when you can leverage existing assets — like infrastructure — to help speed entry while minimizing investment.
Expanding to a new market can be a significant time and financial investment for any company, but especially for ones just starting out. When considering new markets, be sure to check with your logistics and distribution partners about their existing assets in the area. According to the most recent UPS Change in the (Supply) Chain survey, 15% of high-tech executives surveyed cite “partnering with a logistics provider early-on to assist with market entry” as a top lesson learned when it comes to emerging market expansion.
Leveraging your partners' existing facilities can help your company get into the market more quickly. It also provides flexibility by allowing you to ramp up or down inventory based on need. As an example, many high-tech companies work with UPS in China, where we have a robust network of distribution facilities, multi-modal transportation capabilities, and over 130 field stocking locations (FSLs) for service, repair, and replacement nationally. These tools enable companies to reach their customers quickly, while maintaining a flexible inventory. By not investing in your own infrastructure, you have greater freedom to leave the market if your strategy changes.
Today, 70% of the global purchasing power already resides outside the US. In tomorrow's marketplace, global trade and expansion will only grow in importance. By evaluating new markets as you plan for innovative new high-tech products today, you can set your company up for success to meet demand in both the short- and long-term.