Market Entry in the USA – Overnight Sensation or Disaster?

Executives who invest in the USA hear of fantastic success stories. Consultants present brilliant tales of entering the US market. Unfortunately, in reality the opposite is the case.

Instead of “overnight sensations”, too many German, Austrian or Swiss companies (D-A-CH) deliver weak returns, if at all. Research shows that over 70% of US market entries fail to deliver measurable success.

Still, in light of the necessity to invest abroad, the US is a rich market with ample opportunities. However, even experienced exporters are failing in their attempt to win at the American competition. And, failure is not only temporary or small. Quite the contrary, big multi-million dollar losses and low/no returns over decades are not uncommon.

What are causes of the weak US performance of DACH companies?

Causes of Weak US Performance

The root cause of most DACH failures can be traced to a lack of understanding of US requirements. This ignorance often bleeds into hubris because DACH companies are seasoned exporters. These managers are smart and do know how to conquer a multitude of international countries: European countries – Check! China – Check! Southeast Asia – Check! South America – Check! USA – Choke! Why?!

Blindness to cultural differences is on top of the challenges for DACH companies. DACH managers are highly educated and let the Americans know about it, which is perceived as schoolmasterly. In addition, the “Hollywood” effect, i.e. being familiar with US film, TV or a US stint, deceives them to “get” the country. It does not.

In many cases, DACH managers are not even aware of the impact of their prejudices and cluelessness. Nevertheless, it takes more than a few years to “read” Americans and truly learn how to maneuver the subtleties of communications.

Failure to adapt the product to US needs undermines the chances for success. Just because the rest of the world loves the highly engineered product does not do anything for the US buyer. These are preferring convenience, speed, emotion and brand, regardless of technical specs.

Driving in the US from coast to coast is not a matter of a couple days. Similarly, to conquer a continent like the US requires an adequate commitment. A proven approach of DACH companies is delegating the market development to a local distributor. This may work for Spain. It does usually not fly in the US.

Another major oversight of DACH companies lies in the area of legal requirements, taxes, liability, and regulations. For example, in the US there are over 13,000 sales and use tax jurisdictions, which is critical to consider when opening an ecommerce store.

Despite these challenges, the US is a fantastic market with 340 million inhabitants, $25 trillion gross domestic product and 33 million companies.

For ideas on how to win in the US, see the upcoming article “7 Recommendations for Market Success in the US”.

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