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HSBC Study: More U.S. Mid-Sized Companies Bolster Plans to Expand International Revenues
28 June 2010
Nearly Three-Quarters of U.S. Respondents Plan to Increase Revenue Objectives; Focus Shifts to Growing Sales as Cost-Cutting Slows
June 28, 2010 (New York) - The new International Business Survey, released today by HSBC's Commercial Banking division, found that U.S. mid-sized companies, much like their large-cap brethren, are increasingly pinning their growth plans on markets overseas even as the U.S. economic recovery slowly takes hold. The U.S. component of the survey, conducted for the third year, polled nearly 650 U.S. senior financial executives from companies with annual sales between US$20 million and US$5 billion, a critical segment of the U.S. economy accounting for nearly US$8.2 trillion in annual sales*1.
HSBC's International Business Survey found that the portion of U.S. executives planning to increase their overseas sales targets rose sharply to a survey high of 72%, up from 49% in 2008 and 56% in 2009, underscoring the rapid globalization of the core of America's economy. Fifty-six percent (56%) of the executives polled say their overseas sales are growing faster than domestic sales, a rebound from 52% last year though still below the 67% level seen in 2008.
Surprisingly, respondents indicated the most attractive countries for U.S. companies to do business with currently are Canada and the United Kingdom, which surpassed some of America's largest trading partners, including China, Germany and Japan. Forty-five percent (45%) of respondents cited Canada and 38% the UK as their top market for cross-border business; outpacing other dynamic emerging markets like India and Brazil.
However, when it comes to long-term prospects, China still carries the day. Forty-five percent (45%) of respondents chose China as the country with the greatest growth potential for U.S. mid-sized businesses. India and Canada were in a statistical tie, polling 27% and 26% respectively. In 2008 and 2009, the markets that offered the greatest growth potential were China, India and Brazil.
As the economy shows signs of life, more mid-sized businesses are investing in growth initiatives to maintain their competitive edge, rather than cutting costs and taking measures to brace for a downturn. This year, less than one-third of respondents (30%) indicated that they are reducing the number of employees at their companies, down from the nearly half (49%) of respondents that reported staff reductions in the previous year.
"The survey findings validate the untold story of the U.S. economy that we see every day; mid-sized businesses at the heart of the U.S. economy are increasingly adding cross-border trade to their growth plans," said Christopher P. Davies, senior executive vice president and head of commercial banking for HSBC - North America. "But the fact that many businesses currently find the greatest opportunities in established markets like Canada and the United Kingdom suggests that the challenges to tapping high-growth emerging markets remain high."
Perceived risks hindering businesses' interest to engage in international business include legal complexities and local regulations (49%); complexity of certain international markets (42%); and sovereign (country) risks (29%).
Although the survey underscores renewed confidence among U.S. businesses, respondents still expressed some caution, which is evident in their reluctance to take on new debt. A surprising 60% of respondents stated that they have not applied for an increase in their credit line or for a new line of credit in the past 12 months.
For the first time, HSBC Commercial Banking also interviewed over 3,600 mid-size companies in 10 additional markets, such as Hong Kong, India, mainland China and Brazil, to gauge their cross-border business activities. These global findings revealed that non-U.S. businesses overwhelmingly identified the U.S. as the top market in which to conduct international business (44%), followed by mainland China (26%).
Davies added: "Despite the perceived risks to expanding internationally, we think that business will become increasingly global. All 10 markets surveyed not only reported that the pace for international growth was faster than their domestic business activity in the past 12 months, but will continue to trend upward in the next two years."
Additional global findings from HSBC's International Business Survey include:
- Ninety (90%) percent of firms surveyed globally said that their international business has experienced growth in the past 12 months. The majority of these firms have observed growth at a pace at or exceeding the growth of their domestic business, with nearly three-quarters (74%) anticipating continued growth in international business activities in the next two years. Barriers to international business, such as international market and legal complexities and local regulations, were not only limited to U.S. companies. Respondents in other developed markets, such as Europe and Canada, cited these factors among their top concerns, as well as emerging markets like China.
This year, HSBC's International Business Survey also separately polled 250 U.S. companies that are not currently engaging in international business. Of particular interest, within the next two years, nearly one quarter (23%) of U.S. domestic businesses surveyed plan to engage in cross-border trading, driven chiefly by the prospects for sales and revenue growth (48%), followed by lower costs for goods and services (21%). Of the 23% that indicated plans for international growth, more than half (55%) reported plans to expand into Canada in the next two years.
From April 9-21, 2010, senior financial decision-makers (CEOs, CFOs, corporate treasurers, senior partners or other senior financial executives) from 899 companies were polled for their responses. These respondents were divided in two categories: 649 U.S. businesses that currently conduct international business; and 250 U.S. businesses that do not currently conduct international business. The survey included a nearly even distribution of companies along a spectrum of annual sales ranging from US$20 million to US$5 billion.
HSBC's Commercial Banking business in the U.S. has sponsored this survey for the past three years. In 2010, the Global Commercial Banking business unit added Hong Kong, India, mainland China, United Arab Emirates, France, UK, Canada, Brazil, and Mexico. Please note the categorization for annual turnover of respondents varies by region.
Notes to editors:
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- Juanita Gutierrez
1 Source: D&B, 2010
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