Trucks at Work

Thumbs still up for global expansion

The number of executives recently polled by the KPMG Global Enterprise Institute isn’t huge – just 1,150 from mid market companies in the U.S., Canada, Brazil and Mexico, with nearly 500 of the respondents from the U.S. alone – but their optimism is certainly a good thing to behold; especially as their positive outlook on global expansion efforts could bode well for domestic freight activity.

KPMG’s Mid Market Global Expansion Survey – laden perhaps with the far too sunny title of Global Rewards Within Reach – discerned that the majority of the executives polled believes overseas markets are proving fruitful, despite the state of the global economy, and that international expansion has become an increasing priority as well as an integral part of their growth strategy and revenue stream.

Indeed, KPMG found that even though majority of executives polled said the global credit crisis is affecting their ability to implement plans for expansion into international markets, 80% of those in the U.S. believe their global expansion plans achieved success over the last two years – a significant jump from the firm’s previous surveys back in 2009 (50%) and 2007 (43%).

Furthermore, 74% of U.S. respondents said company leadership remains very focused on overseas expansion, up from 52% percent in 2009 and 39% in 2007). Similarly, 75% say that global expansion is integral to their company's growth strategy – a big jump up from 53% in 2009 and 37% in 2007.

“Our earlier surveys found that international expansion was a piece of the growth puzzle for middle market companies,” noted Jerry Jolly (seen at left; and what an awesome name by the way!), a KPMG partner and leader of the mid-market practice. 

“And today, despite the state of the global economy, our survey cements the fact that mid market companies are turning to different geographic markets to foster the growth they are looking for,” he added. “Those mid market companies conducting business overseas are seeking to build on the momentum they've generated.”

KPMG’s poll also discovered that those U.S. executives seem to be very bullish on the revenue coming from new international markets.  In fact, 78% said they plan to increase non-domestic revenues from foreign operations and customers – up sharply from 66% in 2009.

Trucking should take heart from such feelings, because foreign trade – especially exports – translates into freight demand on the domestic front, explained Noel Perry (at right), senior consultant with FTR Associates and principal of consulting firm Transport Fundamentals, in an interview with me last year.

“There’s a big upside opportunity with trade for carriers,” he noted, even though – on a longer-term basis – Perry remains more pessimistic about U.S. economic prospects and the fallout for trucking.

“Exports are up; that’s good for manufacturing and that’s been good for freight,” Perry said. Indeed, the U.S. trade deficit shrank in June by a significant 10.7% to $42.9 billion from May, according o the Bureau of Economic Analysis (BEA).

The agency added that U.S. exports grew 0.9% to a record $185 billion in June, while imports declined 1.5% to $227.9 billion. In fact, the $132.8 billion worth of exports in goods alone back in June were the highest on record, noted Rebecca Blank, acting U.S. Commerce Secretary – adding that the nation remains on track to exceed last year’s export total of $2.1 trillion.

Not too shabby, folks.

OK, back to KPMG’s survey and some other good indices gleaned from its digital pages: When asked how they intend to expand overseas over the next five years, 73% of U.S. executives said they plan to increase facilities, offices and plants in the next five years – up from 41% in 2009. That’s a BIG jump.

The interesting thing -- obviously -- is that this more positive outlook on global markets is coming at a time when those same executives are still gloomy concerning the economic prospects here at home.

KPMG found that the 58% executives in its poll said the U.S. economy is worse than last year – and that’s why expansion overseas is being increasingly seen as a way to generate revenue growth.

"What middle market company leaders have conveyed to us, to an even greater extent in this year's survey, is that there is plenty of market potential in new countries and in extending services to new markets," said KPMG's Jolly. 

“Our survey results show that many more companies recognize opportunity and see the allure of new markets for generating new profitability and revenue.” He added. “It is no longer a question of testing the waters; these companies are going global.”

And hopefully freight will also grow as a result of such efforts. 

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