Editor's Note: Harvard Business School professor John Quelch writes a blog on marketing issues, called Marketing Know: How, for Harvard Business Online. It is reprinted on HBS Working Knowledge.
Accounting for almost 30 percent of world GDP, the United States is the world's largest and most demanding market for almost everything from oil to microprocessors to premium coffee. Companies around the world aspire to do business in the U.S., or at least with U.S. companies in their home markets. By doing so, they learn much about the latest management practices, they can be closer to the cutting edge of innovation, and they can boost their reputations by supplying well-known U.S. firms.
The market size of the U.S makes it an important target but, in addition, foreign companies often feel they have to crack the U.S. market in order to gain respect. No CEO can lead a global company if that company does not have a strong presence in the USA.
So how do you penetrate the U.S. market? The annals of business are littered with foreign companies that have never quite succeeded in the USA. But here are four companies that have. Each carries a special lesson.
1. Royal Bank of Scotland. This company built up a strong retail market share in the U.S., not under the RBS brand, but through a series of acquisitions of regional (not national) banks. RBS is adding value for its shareholders by letting these banks retain their individual brand identities, by focusing on improving back office efficiencies, and by having the highly respected CEO of one of the acquired entities lead the combined U.S. organization. Meanwhile, RBS is building its B2B brand with institutional clients on Wall Street.
2. IKEA. IKEA offers a furniture retailing value proposition and experience unparalleled in the U.S. market. There are no national furniture retail chains, making market penetration easier. IKEA's location selection expertise and their established global supply chains enable them to offer exceptional category-killer prices that are further keys to success.
“No CEO can lead a global company if that company does not have a strong presence in the USA.”
3. ING. The Dutch bank converted its weakness (no retail branches in the U.S.) into a strength. Following a successful Canadian market test, ING gave its entrepreneurial general manager the green light to offer retail banking services to U.S. consumers but exclusively on an online basis. Taking advantage of its low no-bricks-and-mortar cost structure, ING was able to offer generous rates on certificates of deposit. Just four years on, ING is the third-largest holder of consumer CD investments in the U.S.
4. Dyson. The British home appliance maker earned a break when it managed to get a Best Buy buyer to take one of its vacuum cleaners home to test. The buyer was impressed. Fortunately for Dyson, Best Buy became the first U.S. retailer to stock Dyson vacuum cleaners—other U.S. retailers invariably follow Best Buy's lead. Electronics retailing in the U.S. is concentrated (10 chains control 60 percent of the market) and tough to penetrate. But Dyson could not have succeeded had its products not been superior to other vacuum cleaners already in U.S. stores.
A current case, well worth watching, is the effort of Tesco, the British retailer, to enter the U.S. market with the new Fresh & Easy chain of discount grocery stores. Avoiding geographies where Wal-Mart is entrenched, Tesco has so far opened 50 stores in the growth markets of California, Nevada, and Arizona. The question is whether Tesco's assortment and value proposition will be appreciated by enough consumers fast enough for weekly store sales to reach profitable levels. Stay tuned.
Join the discussion on Harvard Business Online.