Republic's investors take US market by storm
San Jose California in the Silicon Valley heartland: Irish companies have established strong concentrations in the Silicon Valley region, as well as in New York, Boston, Chicago and Los Angeles.
Irish businesses invested $21 billion in the US in 2004, employing 55,000 people in over 300 firms, and the love affair is growing, writes Gerry Murphy
Irish businesses, from high-tech to heavy engineering, are investing and winning in the highly competitive US market, with recent figures showing that Irish companies invested a staggering $21 billion (€17.7 billion) in the US in 2004 alone.
Thirty years ago US investment in the Republic became a strong focus of the Irish government, resulting in companies such as Microsoft, Intel, IBM and Dell establishing operations here.
IDA Ireland played a key role in this drive and now acknowledges the presence of 478 US companies here employing 90,236 people. These companies have provided high-quality employment and many positive spin-off effects in the Irish economy.
Irish investment in the US is a more recent development with Irish companies initiating serious investments in the market from the mid-1990s onwards. Recent research undertaken by Enterprise Ireland confirms that there are over 300 operations owned by Irish companies in the US employing over 55,000 people. These include acquisitions in manufacturing and distribution and companies own sales and marketing offices and service centres. These numbers are growing and are set to increase further over the coming years.
Irish investment in the US has increased tenfold in the last decade. According to the US department of commerce, bureau of economic analysis, in 1994 Irish investment in the US was $2.974 billion. By 1997 it had multiplied fourfold to $10.394 billion and then doubled to $21 billion by 2004.
Increasing outward direct investment to the US is indicative of the Republic's economic maturity and may be the only way in which Irish companies can increase their share of the US market. This outward investment is generally market-seeking, meaning that key high-value jobs and facilities such as R&D are retained in the Irish home market.
This outward investment generates repatriated profits for the Irish economy and is a very positive development in the internationalisation of Irish business.
Irish companies are establishing operations in the US, securing impressive sales and partnership deals and investing heavily in their market presence. They are located in 35 of the 50 states with strong concentrations in New York, Boston, Chicago, Los Angeles and Silicon Valley. These new pioneers are following the path of the early Irish emigrants to the US, those emigrants credited with building these cities.
The new emigrants are in different businesses though. They are securing sales contracts with large US corporates such as Intel, Microsoft, Citibank, Bank of America, Merck, Pfizer, Fidelity, Boeing and Proctor & Gamble. This business is being won based on strong innovative technology designed in the Republic. The products include software for corporate governance, diagnostics for life sciences and innovative products in the more traditional engineering and building supply sectors.
Impressed by the successes of Irish companies in the market, US companies are now investing in them to partner in their future success. Recent investments in Irish companies have been announced by Fidelity, Motorola, Benchmark Capital and Accel Partners who all are betting their dollars on the future of Irish companies.
The US market is both a challenging and hugely rewarding market for Irish industry. Those committed to building their presence and investing in the market are reaping strong returns. Large companies such as CRH, Riverdeep & Icon continue to grow and expand through acquisitions and strong sales. Newer entrants such as Qumas, Curam, Combilift and Similarity Systems are demonstrating that opportunities exist and significant sales can be secured with a focused strategy in place.
Over the past 10 years Irish industry has learnt a lot in the US market. Successful exporters vouch for an approach involving persistence, patience, adequate financial resources and dedicated management time as important factors in their success. With a land mass 130 times the size of Ireland and a population a multiple of 73, it is a country where focus is key. Market segmentation is critical and spending considerable time accessing the market and formulating strategy before entering is to be encouraged.
Irish-Americans young and old are engaging with Irish industry in the US. Many key employees of Irish companies in the US claim Irish ancestry; many others act as important advisers and non-executive directors to these new pioneers. Others have returned to Ireland to set up new companies, with over 10 per cent of start-ups in Ireland supported by Enterprise Ireland in 2004 established by returning emigrants.
To be successful in the US Irish companies must show huge commitment from the beginning, with senior management typically relocating to the US for the initial period. Employing local US staff with the all-important local contact network is also a must. Research not just on the targeted market but also the competition is key. In the country where communication is king, those who invest from the outset in their marketing positioning strategy gain returns fastest.
To support this growing internationalisation of Irish business in the US Enterprise Ireland has opened incubation facilities in New York, Boston and Silicon Valley and has supported over 60 companies in recent years to establish their first position there. These centres help Irish companies focus on important business development issues from day one.
The growing trend of Irish investment in the US is not going to slow down any time soon. The US is a land of opportunity and one that is immediately attractive to Irish industry. Enterprise Ireland is committed to supporting the continued investment and growing the next generation of US pioneers. The Irish in the US are now giving back in a real way to the country that was so important in our economic transformation.
Gerry Murphy is director of international sales and partnering with Enterprise Ireland