The following are a number of strategies which can be employed by a foreign company establishing operations in the United States.
Sales and Distribution. Under this business strategy, parties manufacture their product in their home country and sell their products or services to U.S. customers, through direct sales or through sales agents, distributors, wholesalers, dealers or other intermediaries in the United States. The United States represents an enormous market for foreign companies to sell products, license software and perform services. There are numerous distributors, dealers and other sales intermediaries available in the U.S. to assist foreign companies in setting up marketing and distribution channels here.
Joint Ventures and Teaming Agreements. Under this business strategy, two or more parties conduct a collaborative effort to pursue a specific business purpose. In an “entity joint venture” the parties form a separate corporation or other entity to conduct the business of the venture. In a “non-entity joint venture” the parties contribute capital, personnel or other resources to conduct the business of the venture without the formation of a separate entity. Joint ventures and teaming agreements are a common form of business in the information technology industry for product development and major project management. These are extremely useful strategies for positioning foreign companies
to become involved in major projects in the U.S. where they would otherwise not have access. In addition, U.S. companies frequently look to team with foreign companies in joint ventures to obtain access to business opportunities in Europe.
Franchise and License Agreements. Under a franchise arrangement, the franchisor grants the right to a franchisee to engage in a proprietary form of business. A franchise or license arrangement is a desirable way for a foreign company to establish and expand its business throughout the United States in a limited period of time or with a limited capital investment.
Sub-contracting. Under this type of business arrangement, a party performing a contract hires a second party to perform a portion of the contract. Like teaming agreements and joint ventures, this is a proven method for foreign companies to obtain access to major business opportunities to which they would otherwise not have access.
Manufacturing. Under this strategy, the foreign company establishes manufacturing operations directly in the United States. This could range from final assembly of components sourced in the company’s home country or other countries, to full-scale manufacturing operations in the U.S. Finished products can be sold throughout the United States and, under NAFTA can be distributed on a reduced-tariff or tariff-free basis throughout Mexico and Canada.
Government Contracts. Under this type of business arrangement, a party sells a product or performs a service for a federal, state or local government entity. Under the Trade Agreements Act, foreign companies are now permitted to bid directly on most U.S. government contracts and to perform subcontracts thereunder. Government contracts are among the largest sources of opportunity for vendors in the Information Technology industry. The performance of government contracts are normally governed by specialized commercial laws which are significantly different from normal U.S. commercial laws.
Under The Trade Agreements Act, foreign companies from many countries are now permitted to bid directly on most U.S government contracts and perform subcontracts. Buy America Act restrictions contain “loopholes,” waivers and exceptions which, with proper planning, allow foreign companies to provide products to the U.S. Department of Defense and other government agencies.
The performance of government contracts is governed by specialized commercial laws which are significantly different from normal U.S. commercial laws. Thus, foreign companies interested in this market must seek expert advice to ensure full compliance with government regulations.
Mergers and Acquisitions. Acquisitions are a proven method of establishing a major business presence in a foreign country in a short time period. A party can acquire a company through the purchase of its stock, the purchase of its assets and liabilities or the statutory merger of the two entities. Foreign companies should consider the acquisition of a U.S. company as a strategy for entering the U.S. marketplace. While this usually involves a significant capital investment, such investment is often smaller than the ongoing capital investments required to grow a business from the start.
Initial Public Offering. The initial public offering, or “IPO,” is the initial sale of stock to the public in a “public offering.” An IPO requires the registration of a company’s stock with the U.S. Securities and Exchange Commission. Public offerings are usually conducted through an “underwriting” by a registered broker-dealer. Foreign companies can list their securities on U.S. exchanges through ADRs. In addition, U.S. subsidiaries of foreign companies can issue securities directly in an IPO to be traded on all U.S. exchanges. An IPO provides an excellent liquidity event and “exit strategy” for founders and early investors to profit from their investment in the company. U.S. stock exchanges, particularly the NASDAQ, have provided some of the highest valuations in the world for emerging technology companies.