The USA, with its huge market, has always been a bit of an anomaly, and companies have struggled in the past to expand there. However, given Trump’s pro-business policies and commitment to increasing incentives for foreign companies, coupled with Europe’s political woes, the USA is becoming competitive again. Increasingly, multinationals are beginning to look to the States, especially as the tax incentives being offered by different regional US Government are extremely favourable. We talk to Max Kichniawy, CEO of gatc LP (www.gatclp.com), who helps assist companies to establish themselves in the very lucrative US market.
Why do you believe companies have traditionally struggled to establish themselves in the US?
MK: The US market has a huge potential for most companies and industries. At the same time, it is the most open, innovative and competitive economic region in the world, representing about 16% of the gross world product and almost 30% of the world’s consumer goods market. There are different factors why foreign companies traditionally struggle when expanding their business to the USA, especially compared to other foreign markets. We often illustrate these struggles with the characteristics of an iceberg: roughly 20% of its volume is visible, while about 80%, the majority of its volume, is not visible at first sight. Companies in the largest domestic market in the world face great challenges, which they often underestimate, and which they can rarely solve on their own and especially out of Europe. After all, the US consists of 50 federal states with individual laws, rules and regulations. The banking and finance sector is very different to what we know in Europe, there is a need for different product-certifications for the US market, the legal framework is different, the rights of employees, the significance of marketing, challenges in the logistics sector, importing goods, and so on. Additionally, the US market in general is very service-oriented and therefore requires a local infrastructure. Americans prefer to do business with (US) companies which are ‘reachable’ within their borders. Because of all these reasons, there is one very prominent ‘minimum requirement’ that should be met by every foreign company doing business in the United States: a fully owned local US company.
How do you see this changing? Do you think Trump is helping to make the USA more attractive for international companies to relocate?
MK: At the moment, we definitely see an increase of requests for our services in the USA, which is a good sign. Trump just publicly mentioned his intention to reduce corporate taxes, for example, which also would be very beneficial for foreign companies operating with their own local US entity. Additionally, from my point of view, people realise that there are also federal courts in the USA which can ‘limit’ the President’s capability to act, for example regarding the current topic of VISA and immigration. Punitive tariffs on goods manufactured outside of the USA have been mentioned by Mr Trump, but the real intention is highly questionable and probably is more about strengthening his negotiating position with other countries or the EU. Overall, we currently do not see any major changes with the new administration, but the general spirit regarding the attractivity of the US market for foreign companies remains positive as well as the requirement of a local infrastructure to be successful on the long run.
How long has gatc LP been in operation and how did it evolve?
MK: gatc LP was founded as the “German American Trade Center” in Atlanta, Georgia in 1983. During that time, my father had been active in different advisory boards of medium-sized German companies and realised that the majority of these companies struggled to establish themselves in the US market. After analysing this situation and evaluating the reasons, our business concept was born, offering companies the realisation of a professional, operational and fully owned local US company. Nowadays, we changed gatc to the “Global American Trade Center” as our services are not limited to German companies only and we have clients from all over the world.
How do you see the differences between the US and German markets? For example, what sort of percentage revenues were made in the US by German companies and do you see this rising in years to come? If so, why?
MK: The US market has a huge potential, it is the economic equivalent of a continent rather than just a single country. Consequently, a US market share of ‘just’ single-digit percentages is equivalent to a dominating position in an average European country. The share of US-sales is generally increasing. The German DAX companies, for example, made an average of 25% of their revenues in the USA in the previous fiscal year. They also want to scatter currency risks, for example. From my point of view, this trend is rising in the years to come, because the US market will remain one of the largest markets in the world. During times in which shareholders expect continuous growth, companies cannot afford to avoid the potential of the US market.
You offer a market entry service for companies looking to expand into the US market. Can you explain in more detail what this means?
MK: Since 1983, gatc LP has supported medium-sized businesses with their US-operations, regardless of size, industry or home country. Decades of practical experience and local knowledge, paired with a reliable back-office service, make it possible for our clients to have a transparent, cost-effective and lasting professional presence in the US, offering a complete infrastructure, that meets the requirements for optimal care of US customers in combination with real market anticipation. In the USA, we always act in the name and on behalf of our clients. We take care of the administration of the US company, the accounting, human resources, order processing and customer service, logistics, warehousing and sales controlling. Generally speaking, we take of everything apart from actively selling (where we can also do the preliminary work). On a side note, I have to mention that our services are not only reasonable for companies entering the US market, but also for companies expanding their US business, even when they already founded their own local US company.
What advantages would you say this offers companies looking into the US market?
MK: There are lots of advantages for companies working with us: On the one hand, we know the differences in rules, laws and regulations as we have been doing business for more than 35 years in the US. On the other hand, our clients remain very flexible and do not have to spend their time in organising and maintaining their US operations, but can rather focus on strategy and sales in the US. It is also a very cost-effective approach (up to 40%) for our clients to present themselves in a professional and lasting manner to their US clients. As we work very transparently with weekly and monthly reporting in place, our clients have 100% control over their US business and market knowledge. There is no need for investing in real estate and other warehouse and facility related launching costs and so on.
What are your key markets or industries, or do you operate throughout all industries?
MK: Generally, we operate throughout all industries, while establishing certain “focus groups” to realise synergies between our clients. One of our focus groups, for example, is the Medical Device Industry or Mechanical Engineering, where we have constant growth rates in the US. In general, our clients are very innovative medium sized companies, operating in niche markets.