Going West

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While the United States may not have the population or the economic growth of China, it is still the largest national economy. At almost $16 trillion, US GDP is nearly double China’s. The US also remains an easy place to do business, placing 4th in The World Bank’s 2013 “ease of doing business” ranking. Denmark ranks 5th. Mainland China ranks 96th.No wonder then that many Danish companies have chosen to “go West” and implant in the US. The question is: Do they get as much out of the US market as they could?

Once you establish a business in the US – or anywhere for that matter – you start building an important intangible asset: Brand equity. Brand equity is a set of perceptions in people’s mind that let them prefer the branded products or services over competitors. Sometimes, when brand equity applies to a corporate brand, as opposed to a product line brand, it is referred to as corporate reputation. Because the US is such a large economy, building brand equity and reputation opens opportunities for significant business expansions – many of which may not have been economically viable in a smaller market. As you establish a reputation in the US market, customers may want to see you offering new products and services based on their experience with you and your products. How do you capture that opportunity?

First, you need to understand how people think about you as a company and as a brand. You also want to get a sense of the extent to which people would like you to offer new products and services. Once you have insights into whether customers would welcome brand expansion, and which product and services are perceived as most relevant, you can look at how attractive those business opportunities are. There are also issues of implementation: Do my current resources and capabilities allow me to expand?

If the answer to that question is negative, different options are available:

  • Build or acquire the necessary capabilities – this is the way to go if the contemplated expansion is “strategic”, i.e.  it will deliver a substantial part of the corporation’s value going forward. A recent high profile example of such a brand expansion is accounting firm PwC’s intended acquisition of consultancy Booz & Co in order to broaden the consulting services it can offer to its clients. Reportedly, Booz & Co. will be integrated into PwC’s advisory services and do business under the PwC name.
  • Source products from an external manufacturer – this is a good approach if you have the right distribution network in place, but don’t have the capabilities to make the new products. For instance, when Microsoft decided to get into the tablet PC business with its Surface tablets, it hired Taiwanese manufacturer Pegatron to make them.
  • License your brand to a licensee – this is usually the right approach if you have neither the production nor the distribution capabilities. One example is Caterpillar’s footwear line brought to market by licensee Wolverine Worldwide, and selling some six million pairs annually.

At The Westside Group we have helped many different companies – big and small – expand into new businesses. It is our experience, that a successful brand expansion starts with a careful up-front assessment of the brand, what it stands for in customers’ mind and how it can be leveraged for expansion. Then specific business opportunities can be analyzed and optimal business models can be developed, and you can realize the full potential of your brand in the US market.