Overview

The United States of America has a population of 310 million people living in 50 states and the District of Columbia. Of this total, about half constitute the employable labor force. The nation’s capital is Washington, D.C..

The combination of a huge, wealthy domestic market, a highly productive labor force, deep capital markets, and a legal system that protects intellectual property makes the U.S. a major destination for foreign direct investment--$44 billion in the first quarter of 2010.

U.S. economic policy generally welcomes foreign investment, viewing it as a means to promote capital formation, employment, productive capacity and new technology. The U.S. is viewed by many as the ultimate haven for preservation of capital because of its political and economic stability. The U.S. economy has proven to be remarkably resilient to both natural disasters and political pressures such as terrorism.

The U.S. has an abundance of natural resources that have been used to develop a host of homegrown industries that have expanded their operations abroad. New York City is the undisputed financial capital of the U.S. and has been instrumental in developing public stock exchanges as well as financial products and services that are used worldwide.

The U.S. offers numerous financial incentives--to include Federal and State tax incentives--to build a business, but buying a business may be a cheaper alternative. The decision whether to buy or build a business in the U.S. is governed by a host of factors--geographic, demographic, financial and industrial--that need to be studied by foreign investors before making a commitment.

Companies use mergers and acquisitions (M&A) as alternatives to internal expansion. In the U.S. there are a number of securities and tax regulations governing M&A, so it’s critical to seek not only financial and tax advice, but legal advice as well.

If good acquisition targets are not available, a joint venture (JV) or strategic alliance may be a viable way to enter the market. These alliances offer a way to grow and to obtain specific knowledge that would be very costly or time consuming to achieve alone.

A foreign enterprise may operate in the U.S. through a variety of legal forms, including corporations, general partnerships, limited partnerships, limited liability companies (LLCs) and U.S. branches.

U.S. Heritage

The United States is essentially a nation of immigrants, and it is an extremely diverse nation, geographically, historically, ethnically, racially and politically. From its origins as a group of obscure colonies hugging the coast of the Atlantic Ocean a little over 200 years ago, the United States has undergone a remarkable transformation. One political analyst has called it “the first universal nation.” Its population of 310 million people represents almost every nationality and ethnic group on Earth. It is a nation where the pace and extent of change — economic, technological, cultural, demographic, and social — is unceasing. Events in the United States are often the first sign of the modernization and change that inevitably bring other nations and societies into an increasingly interdependent, interconnected world.

Yet the United States also maintains a sense of continuity. It possesses core values that can be traced to its founding as a nation in the late 1700s. These include a faith in individual freedom and democratic government, and a commitment to economic opportunity and progress for all. They are the legacy of a rich and turbulent history. The continuing task of the United States is to ensure that its values of freedom, democracy, and opportunity are protected and will flourish through the 21st century.

The history of the United States has been an experiment in democracy for those 200+ years. Issues that were addressed in the early years continue to be addressed and resolved today: big government versus small government, individual rights versus group rights, unfettered capitalism versus regulated commerce and labor, engagement with the world versus isolationism. The expectations for American democracy have always been high, and the reality has sometimes been disappointing. Yet the nation has grown and prospered, through a continual process of adaptation and compromise.

Business Etiquette

The U.S. has a reputation for being informal. American friendliness and informality is legendary. People will not wait to be introduced, and will even begin to speak with strangers as they stand in a line, sit next to each other at an event, or gather in a crowd.
This does not mean, however, that a familiarity with or understanding of protocols and customs is unnecessary for the visiting executive.

Communication Style

• Americans are direct in the way they communicate
• They value logic and linear thinking, and expect people to speak clearly and in a straightforward manner
• Time is money in the U.S., so people tend to get to the point quickly and are annoyed by “beating around the bush”...don’t get insulted or take it as a personal affront
• Virtual communication (i.e., e-mail, SMS, Skype, etc.) is very common, with very little protocol or formality in the interaction

Business Meetings

• Arrive on time for meetings; time and punctuality are extremely important
• Meetings may appear relaxed, but they are taken quite seriously
• With the emphasis on controlling time, business is conducted rapidly
• Expect very little small talk before getting down to business
• If there is an agenda it will be followed
• At the conclusion of the meeting, there will be a summary of what was decided, along with a list of action items (“next steps” to be taken and by whom)
• It is common to reach an oral agreement at the first meeting
• The emphasis is on getting a contract signed, rather than building a relationship; the relationship may develop once the first contract has been signed

Business Dress

• Appropriate business attire varies by geographic region, day of the week and industry
• In general, people on the East coast dress more formally, while people in the West are more informal
• Executives usually dress formally, regardless of which part of the country they are in, but “Casual Friday” is common in many companies.
• High technology companies often wear casual clothes every day
• For an initial meeting, dressing conservatively is always in good taste: Women can wear business suits or dresses; Men should wear a business suit unless you know the firm to have a casual orientation

Greeting

• The handshake is the common greeting
• Handshakes are firm, brief and confident
• Maintain eye contact during the greeting

Titles

• In most situations, you can begin calling people by their first names
• Most people will insist that you call them by their nickname, if they have one
• In formal situations, you should use titles and surnames as a courtesy until you are invited to move to a first name basis, which usually happens quickly

Business Cards

• Business cards are exchanged without formal ritual
• It is common for the recipient to put your card in their wallet, which may then go in the back pocket of their trousers; this is not an insult
• Inviting your business associates out for a meal is considered a nice gesture

Business Entertaining

• Business breakfasts are common
• Business lunches are common and may last two hours
• The person extending the invitation usually pays
• Business is usually not discussed until everyone has ordered their meal
• Socializing occurs most often after business is conducted
• Business entertaining is as varied as the country, i.e., it can be in the form of cocktail parties, golf games, barbecues, formal or casual dinners.
• Generally, a dinner, even though for business purposes, is treated as a social meal and a time to build rapport
• Spouses may be included in business dinners
• If you are hosting the meal, make payment arrangements beforehand to avoid haggling over the check
• If the host offers a toast to you, be sure to reciprocate later in the meal

Best Practices Leadership

Strong executive engagement: The leaders and managers of U.S. companies are becoming increasingly engaged to insure that all programs and initiatives are aligned with corporate strategy and focused on the right business issues.

Alignment with business strategy: As leaders move up in the organization, U.S. companies are spending more time helping their high potentials to shift from people and project management to strategic business and operations management.

Tailored leadership competencies: Leadership development programs in U.S. companies are increasingly based on leadership competencies identified as most important to their specific business and industry sector. Succession planning, career development and other talent development activities are considered critical activities.

Integrate with talent management: Building a sustainable leadership pipeline is considered by most U.S. enterprises to be a central leadership initiative and part of the company’s regular business practices, rather than simply an incremental activity. In fact, one of the biggest indicators of an organization with first-class leadership is the existence of a set of established practices and a corporate culture that encourages development throughout the enterprise.

Target all levels of leadership: While the term “leadership” may not seem to apply to first-line managers, U.S. companies have long believed that high-impact leadership development programs have elements that apply to every level of management.

Apply a comprehensive and ongoing approach: Relying solely on instructor-led training events are, for the most part, a thing of the past. Programs now include developmental assignments, 360-degree assessments, meetings with global counterparts, case studies, external education and a wide variety of e-learning and other media to give leaders a complete experience. People learn to lead by doing, so the best programs now focus heavily on experiential learning.

Market Entry Strategies & Options

• Establish your company’s credentials up front, before you meet with your U.S. prospects. Provide the equivalent of a Dun & Bradstreet, an annual report, or other information in advance, describing your financial condition, reputation and services.
• Carefully assess what your marketing requirements will be; check what methods are currently being used to market products/services similar to yours.
• Determine how your products and services might have to be adapted or modified in order to successfully sell in the U.S. market. Packaging, labeling, brand name, trademarks, patents and warranties should be examined carefully.
• If your product becomes a component of a finished good for export, it is possible that the import restrictions or limitations on your product could be modified to give it preferential treatment.
• Evaluate your competition through a thorough analysis of the market, price competitiveness, product quality and service.
• Make clear the features, benefits, proof of benefits, and functions of your products and services to give more impact to your sales presentation and to make them compatible with U.S. practice. Many U.S. companies sell their products on the basis of a competitive price/performance ratio, translating product features into benefits.
• Know what the prospective customer believes the product will do for him or her, not what it is, to be successful in marketing benefits and value. Know the needs of your customer’s customer.
• Check good sources of information about U.S. economic activity, such as the Standard Industrial Classification System (SIC) and the Standard International Trade Classification System (SITC). These are classifications of U.S. firms, products and services.

Economy

Through September 2008, the U.S. economy had been marked by steady growth, low unemployment, modest inflation, and rapid advances in technology. However, the country’s current GDP is flat, the U.S. dollar is losing value in relationship to foreign currencies, unemployment is way up (9.5%), employment is relatively low and the Federal Reserve interest rate is between zero and .25%. Inflation remains low and the Dow Jones Industrial Average is best described as moving sideways.

That said, the market-oriented economy currently is the largest and most technologically powerful in the world.

A central feature of the U.S. economy is the economic freedom afforded to the private sector by allowing the private sector to make the majority of economic decisions in determining the direction and scale of what the U.S. economy produces. This is enhanced by relatively low levels of regulation and government involvement, as well as a court system that generally protects property rights and enforces contracts. At the same time, U.S. businesses face higher barriers to enter their rivals’ home markets than foreign firms face when entering the U.S.

U.S. companies are at the forefront of many technology-driven industries, especially computers, medical equipment, aerospace and military materiel. This has contributed to the development of what KPMG refers to as a “two-tier labor market”, in which those at the bottom lack the education, professional knowledge or technical skills of those at the top.

Today, the United States is home to nearly 30 million small businesses, half the world's millionaires, 40% of the world's billionaires, as well as 139 of the world's 500 largest companies.

Political System

The U.S. government is that of a federal republic set up by the Constitution of the United States. There is a division of power between the federal government and that of the states. The federal government’s division of power is threefold: Executive (President, Vice President, Cabinet, etc.), Legislative (Congress--Senate and House of Representatives) and Judicial (Supreme Court, lesser courts).

Each state has its own political subdivisions and each has its own set of laws governing the conduct of business within its jurisdiction. There is, therefore, no single governmental agency or body that determines all of the laws and regulations applicable to all businesses as in most other countries. There are no federal corporate laws. However, there is a significant body of federal and state regulations that affects the investment decisions of foreign businesses in the United States.

Many federal and state laws and agencies protect the consumer and the economy from what are determined to be unacceptable business practices. These agencies include the Federal Trade Commission (FTC), the Securities and Exchange Commission (SEC), the Environmental Protection Agency (EPA), the Food and Drug Administration (FDA), and the Equal Employment Opportunity Commission (EEOC).

Barriers, Risks and Challenges

The strong economy makes the U.S. an extremely competitive marketplace that rewards efficiency, productivity and integrity, while mandating rigorous compliance with the nation’s complex rules and regulations. Although the U.S. economic health has suffered during the recent global economic downturn and market volatility, the cost of doing business in the U.S. is higher than many free world countries. This requires a corresponding higher level of investment in order to compete with established domestic businesses.

Federal, state and local regulations require a thorough knowledge of tax, commercial and labor laws. For instance, the Fair Labor Standards Act establishes federal minimum wage provisions for hourly workers. The Fair Minimum Wage Act of 2007 determined that $7.25 per hour would be in effect starting July 2009. In addition, many states have their own minimum wage laws. When an employee is subject to both the state and federal minimum wage laws, the employee is entitled to the higher of the two minimum wages.

Corporate scandals in the late 1990s and early 2000s contributed to a crackdown by federal regulators and increased scrutiny of how publicly owned businesses operate.
The Sarbanes-Oxley Act of 2002, which requires publicly owned companies that are registered with the Securities and Exchange Commission (SEC) to document financial-reporting controls, has heightened compliance standards and has increased the cost of compliance while also improving financial reporting transparency.

Future Trends

Foreign interest in establishing a business presence in the U.S. is expected to continue in light of proposals to institute import restrictions and voluntary import curbs and despite increases in reporting requirements.

Multinational corporations (MNCs) from developing countries (to include India) are emerging as major players in both the U.S. and global markets. Many of these companies are developing from simply exporting to the U.S. to manufacturing in this country to establish and protect a stake in the American market.

While the level of sophistication of Indian businesses coming to the United States has increased substantially over the past decade, newcomers, as well as seasoned investors, will undoubtedly continue to confront new problems and challenges. The IUSBA stands ready to assist.

Useful Links

Department of Commerce (http://www.commerce.gov/)
Economic Development Administration (http://www.eda.gov/)
International Trade Administration (http://trade.gov/index.asp)
Invest in America Initiative (http://trade.gov/investamerica/)
Food and Drug Administration (http://www.fda.gov/)
Citizenship and Immigration Services (http://www.uscis.gov/)
Department of Labor (http://www.dol.gov/)
Department of State (http://www.state.gov/)
InfoUSA (http://usinfo.state.gov/usa/infousa/)
Equal Emloyment Opportunity Commission (http://www.eeoc.gov/)
Securities and Exchange Commission (http://www.sec.gov/)
Business.gov (http://www.business.gov/)
CIA World Fact Book U.S. (https://www.cia.gov/library/publications/the-world-factbook/geos/us.html)

Important U.S. Holidays

• New Year’s Day (January 1)
• Memorial Day (last Monday in May)
• Independence Day (July 4)
• Labor Day (fist Monday in September)
• Thanksgiving Day (fourth Thursday in November)
• Christmas Day (December 25)

Links and Resources

Country Commercial Guide
Foreign Businesses Doing Business in the United States

Material Attributed to Nelson Lees, Managing Partner, MicroBioPower