51% of US pvt cos plan entry into BRIC countries soon

Private firms in the US plan to target BRIC (Brazil, Russia, India, China) countries and other fast-growing markets such as Indonesia and South Africa to expand their business over the next one to two years, says a survey.

According to a survey by PricewaterhouseCoopers, titled, US Private Company Trendsetter Barometer, 51 per cent of US private companies with an international presence plan to do business in BRIC countries in the next one to two years.

In addition, 66 per cent of the respondents are targeting other fast-growing markets such as Indonesia, South Korea, South Africa, Poland, Turkey and Mexico.

Overall, 74 per cent of the respondents with a global presence have set their sights on emerging and fast-growing markets.

The PwC survey captures the views of 236 chief executive officers/chief financial officers with private companies (128 in the product sector, 108 in the service sector) that report an average enterprise revenue of $278 million annually.

The overwhelming reason for foreign expansion was to broaden their customer base, as cited by 80 per cent of the respondents, whereas just roughly one-quarter of the respondents (24 per cent) are eyeing international markets to lower their cost base.

Other reasons cited for going abroad include facilitating better servicing of global clients (43 per cent), compensating for slow growth at home (33 per cent) and being where competitors are (26 per cent).

Interestingly, 51 per cent of all the US private companies surveyed plan to do business abroad in the next one to two years and 48

per cent already have an international presence.

"Historically, companies expanded into international markets to lower their manufacturing and sourcing costs," PwC Private Company Services practice Partner Ken Esch said.

"The international expansion we're seeing now is well beyond cost arbitrage. It's about increasing sales and accessing new markets to grow the top-line.

To achieve those goals, many of our clients are looking abroad, compensating for weakened demand at home," Esch added.

The surveyed executives also estimate that during this one to two-year time frame, international sales growth (14.8 per cent) will outpace domestic sales growth (11.6 per cent).

The top challenges to operating abroad are finding the right business partners (68 per cent), establishing adequate cross-cultural management (64 per cent) and finding sufficient local talent (56 per cent).

Other challenges that were cited by the respondents include security risks (49 per cent), local regulatory requirements (48 per cent) and corruption (46 per cent).

These challenges were particularly endemic to doing business in BRIC countries, according to the survey respondents.