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How US businesses can enter European markets after COVID-19

By: Annie Button

 

London, UK/Europe; 23/12/2019: Leadenhall Market, a covered market in the City of London financial district. People walking and shopping at Christmas.

There is no doubt that US economy has suffered under the COVID-19 pandemic, and many businesses are struggling to the challenges caused by the virus, and the various restrictions put in place to stop its spread. One of the ways that some businesses have considered in order to overcome these challenges is to move into new markets; many consider expanding into Europe to be one of the best. 

It is generally perceived that as Europe has been very hard hit by the COVID-19 pandemic, it is likely to suffer a recession. However, economists are also cautiously optimistic that these powerful economies will be able to bounce back quickly and return to a state of normality. In the UK, for example, the independent body the Office for Budget Responsibility (OBR) predicts that the country will have recovered by 2021

That means that if US businesses are interested in looking into other markets and having success in Europe, it can be a great idea to get started as soon as possible. Here we take a look at what US businesses can do to successfully enter European markets after the COVID-19 crisis is over. 

Examine how other businesses have had success

Yes, COVID-19 has changed a lot of things regarding how businesses need to operate and strategies used by organisations. But there is still much that can be learned by looking at the success stories of other companies that have taken their product from the domestic market and had huge success in Europe. 

Netflix is a great example of a US business that was able to have enormous success in Europe. It did so by carefully choosing which markets. The obvious low-hanging fruit would have been in Germany and France, which have the highest number of broadband homes in Europe. But these countries already had well-established competitors around the Netflix price point. 

Instead, the company chose as its entry markets the UK and Ireland, followed by Denmark, Finland, Norway, Sweden, and the Netherlands. These have proved to be very effective, and the brand was then able to use this success in one part of Europe to launch into the more lucrative German and French markets. 

Find a favourable tax situation

It may be the case that you are looking to set up a separate business entity from your US company in order to launch in Europe. This can have a number of benefits, not least is the fact that you can put that company in a favourable tax situation. Once again, this about understanding the specifics of each market and how they relate to the rest of Europe.

Gibraltar, for example, is in a unique and powerful position from a business perspective. Gibraltar is technically a British overseas territory but unlike Britain, it is completely free of capital gains tax, inheritance tax, wealth tax and VAT. Setting up your business here provides you with the advantages of British trade with Europe, but a more favourable tax arrangement

Of course, this may not be the ideal situation for your business, but the key thing to understand is that Europe is not a single market place. There are many different countries in unique positions – one may be the most effective for your business. 

Do your research

It is important to recognise that Europe is very different from the US – both culturally and economically. It can be easy to assume that the market for your product or service is ready-made, but this is not always the case. Nor can you rely on the idea that the traction that your brand has made domestically will have any bearing overseas. 

Familiarity with your brand can be absolutely crucial in developing success in a market, and if consumers in Europe do not know you, you may have a tough time making the kind of inroads you are hoping for. The important thing, then, it is ensured that you have done your research into the market properly. 

Just because something works in America it does not mean that it will do the same thing in Europe.

Final thoughts

COVID-19 will affect many aspects of business in Europe as well as the US, so if you are going to launch away from your domestic market, you need to feel confident in your understanding and research. Attempting to build a business abroad is a huge undertaking and you should not go in underprepared. 

Published: May 25, 2020
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Annie Button

Annie Button

Annie Button is a Portsmouth based writer and recent English Literature graduate. Annie has written for various online and print publications and specializes in business and career development. Follow @anniebutton1994 on Twitter.

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