Many mid-size US companies have continued to seek greener pastures in overseas markets since the economy at home fell on hard times five years ago, and of those who have ventured abroad, few have plans to stop, a KPMG report suggests.
Of US companies with sales of $200 million to $1 billion per year, the average portion of annual revenue generated outside the US increased to 42% in 2011, according to executives surveyed by KPMG. That’s up from 31% in 2009 and 23% in 2007.
And even though executives of US companies found it very challenging to deal with foreign languages and cultures, seven in ten said they will continue to expand their company’s international business network in the next five years.
In its latest survey, KPMG polled about 1,150 executives of mid-size companies in the US, Canada, Brazil and Mexico. The previous two surveys, each involving more than 1,000 executives, focused on the US.
“The USA has led the way, with roughly seven-in-ten respondents expanding their international business networks, adding physical facilities, and staffing up in other countries,” according to the report, Global Rewards Within Reach.
KPMG started the surveys because mid-size companies employ more people and generate more revenue in the US than the 1,000 biggest US companies combined. In 2007, mid-size companies had started to mine foreign markets in hopes of boosting sales and reducing the cost of supplies and services, according to KPMG.
Although tight credit, falling revenues in the US market and questionable overseas demand forced more than half of the companies participating in the 2009 survey to scale back their plans, global expansion continued.
By the end of 2011, 94% of participating US companies were multinationals and more than half had facilities, partnerships or joint ventures abroad. Their portion of non-US employees had risen to 36%, up from 26% in 2009 and 14% in 2007.
Untapped market opportunities, the size of the market and whether its economy is growing, and labour costs top the criteria mid-size US companies look for to expand internationally, KPMG’s latest survey shows.
And which regions top their list? Canada (46%), Europe (32%), China (31%) and Mexico and India (26% each).
—Sabine Vollmer (svollmer@aicpa.org) is a CGMA Magazine senior editor.