North America is one of the world's most attractive and competitive markets, comprising the United States, Canada, and Mexico. These three countries are members of the G20 and have an economy representing over one-quarter of the world's GDP.
These offer many opportunities for businesses that want to expand their global presence, such as a large and diverse consumer base, a robust innovation ecosystem, and a favourable trade environment. However, entering the North American market also poses significant challenges and requires careful strategies. This article will analyse the opportunities, challenges, and strategies for entering the North American market.
What are the Business Opportunities in the North American Market?
North America has the world's greatest regional economy at the moment. It will continue to play an important role in the global economy for many years to come, particularly in developing new technologies and using investment capital. Its strong capital markets and financial architecture provide critical support mechanisms for innovative SMEs looking to expand into these emerging markets.
1. Freight and Logistics
Wholesale and retail trade is the most significant Freight And Logistics Market contributor. The North America Freight And Logistics Market is predicted to be worth USD 1558.30 billion in 2023 and USD1993.55 billion by 2029, expanding at a CAGR of 4.19% during the forecast time frame (2023-2029).
2. Information Technology Devices
As digitalisation advances, hardware components are continuously updated to meet the most recent requirements. The North American IT device market is expected to grow at a 1.6% CAGR for the next five years. Rising laptop and mobile adoption is predicted to drive the IT device market during the forecast period. Furthermore, the population's purchasing power in this region drives growth.
3. Life Science Tools
Using advanced tools by researchers in the life science business will likely fuel growth in the sector. This trend has prompted some manufacturers to expand their portfolios of cell biology tools. In 2022, the North American life science tools market was valued at USD 144.08 billion and is expected to expand at an annual growth rate at a CAGR of 10.8% from 2023 to 2030.
4. Software-as-a-Service (SaaS)
SaaS providers progressively incorporate artificial intelligence (AI) and automation into their software products to boost efficiency, accuracy, and productivity. In 2023, revenue in the North American SaaS industry is expected to reach USD143.10 billion. Sales are predicted to grow at a 5.58% annual rate (CAGR 2023-2027), resulting in a market volume of US$177.80 billion by 2027.
The North American Market Challenges and How to Overcome Them
Business Challenges When You Expand to North America?
North America has been a global commerce, science, and government leader for over two hundred years. It's innovative culture and critical thinking have inspired many people and nations worldwide. Businesses recognise the importance of creating and developing new products and services to enhance their businesses. However, you may face increasing challenges as the business environment changes rapidly.
TMF Group's Global Business Complexity Index 2023 (GBCI) can help businesses quickly pick and manage their target markets. But let's discuss the three competitive markets in North America.
Canada
Foreign businesses operating in Canada face a relatively low level of complexity. Apart from corporate income tax and VAT filings, standalone financial statements are not required to be created or filed with government entities.
Businesses that want to incorporate at the federal level may meet difficulties because the jurisdictions of 13 provinces and territories have different criteria. For example, there are different standards for resident directorships and UBO transparency records. Other provincial differences include VAT regulations and rates, tax withholdings, employment insurance and incentive schemes.
Geopolitical problems have influenced Canada, with inflationary pressures directly impacting businesses. However, Canada remains a vibrant labour market, and salary rises in pace with inflation are frequent across most industries. While there is some possibility of a recession, inflation and interest rates have remained stable, reflecting that the economic future is expected to be steady from an international investment standpoint.
United States
The US has faced some inflation in the past few years, but the transition from President Trump to President Biden has increased investors' confidence. Even though President Trump was pro-business and pro-tax, his administration was very unpredictable and could pose difficulties for businesses in the US. The Biden administration provides a more peaceful environment for investment, which appeals to FDI in the US.
The US is likely to stay at a similar level of simplicity in the coming years, but some changes are expected. For example, the Corporate Transparency Act (CTA) will come into effect from 2024 for new businesses and 2025 for existing ones. The CTA will demand more business information to enhance transparency and prevent corruption and money laundering. This may add some complexity for businesses entering the US, but it should also maintain the stability that attracts FDI in the long term.
Mexico
Mexico is a complex country for foreign businesses to operate in. This is mainly because of the processes that are required by the jurisdiction. For example, many face-to-face meetings are still necessary, which can be hard for international businesses with senior directors living in other countries.
Also, the laws can be vague and ambiguous. Mexico started UBO requirements in 2022. Notaries who approve businesses without the proper documents can face hefty fines and sanctions, so they are careful about signing off the required documents. This makes it challenging for businesses to incorporate in Mexico.
Another issue is the Mexican government's stance on renewable energy. It has decided to block foreign investment in renewables and support more traditional energy sources based on fuel. It is a divisive decision because it balances the negative impact on the environment with the financial support for many Mexicans who work in fossil fuel industries.
Business Expansion Strategy When Expanding into North American Market
Expanding to the US or Canada without properly preparing often results in issues such as insufficient financial resources, failure to understand market processes, and failure to differentiate your product or service, all due to inefficient business expansion plans and strategies.
This strategy can be implemented to reduce the risks associated with expanding into North American markets:
1. Be Financially Ready
Expansion requires substantial capital and can be more expensive than you anticipated. It will be critical for you to have realistic and appropriate projections but also to consider any and all costs, from partners and marketing to business development consultants. Making projections is critical because only by doing so will you be able to identify whether or not you are investing too much and whether or not you will be able to execute what you planned and grow successfully.
2. Choose the City Wisely
North America is a highly diverse and complex market that varies in terms of demographics, preferences, and regulations. Each city has its own unique features, such as tax laws, customer expectations, and competitive landscape. Therefore, expanding your business in North America requires careful research and planning to identify the best city market for your product or service. You will need to consider factors such as competition, taxes, and other relevant characteristics that affect your potential customers and profitability.
3. Product and Service Differentiation
When conducting business with foreign corporations, customer are generally suspicious. A common mistake made by businesses looking to expand in North America is failing to differentiate their product and services in order to deliver something new, original, and, most importantly, unique to the North American market. Effectively articulating your unique value proposition will thus be critical because it will help you demonstrate to North American clients why they should use your product rather than a local one.
4. Ask for Help
It is also strongly recommended that you ask for help during the procedure to ensure that your business expansion to North America goes smoothly. Indeed, expanding into new cities and countries will be easier if you seek the advice, assistance, and opinion of someone who is currently on the ground and understands how these countries operate and, as a result, how things should be done.
For example, the Chamber of Commerce in Canada can assist you and provide additional information about target markets. They can also assist you in making new contacts and expanding your network.
gigCMO: Your Partner for Expanding Your Business into Emerging Markets in North America
If you are looking for a way to grow your business in the emerging markets of North America, you need a partner who understands the challenges and opportunities of these regions. gigCMO service is a fractional chief marketing officer who can help you design and execute a successful strategy. With our deep expertise, business knowledge, and strategic insights, who have worked in various industries and geographies, including the United States, Canada, and Mexico, we can help you navigate the complexities of these dynamic markets, seize growth opportunities, and achieve your business goals.
Whether you want to enter a new market, launch a new product, or optimise your existing operations, gigCMO is your partner for expanding your business into emerging markets in North America. Contact us today!
