Establishing A European Business - The US Perspective

By: Michael Halpin

In the current economic climate all companies are looking to broaden their reach and expand into new markets. For US companies, the European market is a largely untapped opportunity - previously US companies thought they were exporting if they sold from the home market in California to Texas! That view is no longer widely held and a lot of US Companies are proactively seeking to sell their products in Europe (indeed a lot of companies are being pushed into Europe by their Venture Capital investors / Board Members who demand more value add form the day they make their investment.
Research shows, however, that companies face significant difficulties in tapping into this market. What are these difficulties? The first and obvious difficulty is the physical distance and the time difference. Managing a team overseas who are leaving work an hour after you come in requires considerable management skill and investment in infrastructure.
If you don't relocate your top sales people to Europe, you will have to hire local native speakers who are familiar with the customs and practices of the country you set up operations in. You then need to be able to communicate effectively with them and understand the issues they are facing. Of course if you relocate your top sales people to Europe you face a whole new set of issues at home, selling in your local market and maintaining your market share domestically.
Setting up an office overseas will cause you to incur significant costs. How can you justify these costs before you have generated any sales revenue and what will your ROI be in year one? Research shows that the set-up costs in year one can be as high as US$350,000.
Being based in California or even in New York, it is difficult to ascertain exactly the market potential for your product in Europe. It is of course necessary to conduct some detailed market research to identify your products potential, your competitors, your unique selling point, the price points for your product, how best to get your product to market (retail, OEM, distributors etc), the number of competitors in your space, is your product a "me-too" product with little product differentiation to appeal, does your product need to be localized and how do you do it, how do you handle the logistics and distribution and after sales support across so many different countries and languages?
Deciding to invest up to €350,000 in year one in developing your European market without detailed answers to the above questions / market research would be a brave but foolish venture, which ultimately will at worst end in failure or at best result in the waste of significant funds which could more profitably be applied elsewhere.
Deciding on which country to base yourself in is perhaps your biggest question. Each country in the EU has their own taxes, customs and procedures and not all speak English as a first language. In some countries it is impossible to do business if you don't speak the local language as the locals want you to converse with them in their native tongue.
More and more companies want to expand into Europe but are faced with these problems and issues. How do they overcome them? Many US companies are unfamiliar with or unwilling to use the services of a European based partner. However, an expertly staffed European partner can not only save you significant outlay and maximise your ROI but can also be the difference between success and failure.
In identifying a European Supply Chain Solution partner, they should be able to offer the following services: market research and analysis, pre-sales support (product localisation, warehousing and storage, order fulfilment, pick, pack and ship, distribution) sales support across Europe (they should have a native speaking, on-the-ground sales force across Europe) to after-sales support (VAT processing, tax returns, debtor management, banking, multi-lingual call centre support, technical support, RMA, asset optimisation etc).
Partnering with a full-service European based company can be the difference between success and failure in getting your product to market profitably, efficiently and minimising the disruption to your domestic business and operations.

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