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Mid-sized companies find growing success in world markets, says new survey

NEW YORK – 03/27/08 – Overseas markets are proving fruitful for medium-sized, US-based companies with many intending to expand globally, despite a struggling domestic economy, according to a recent survey conducted by the Global Enterprise Institute (GEI), an arm of financial advisory firm KPMG.

According to the survey of more than 1,000 executives from mid-sized companies in 10 cities across the country, six out of ten of the executives surveyed plan to expand their global presence in the next five years, compared with 33% who expressed that they will maintain their current size.

In addition, 41% of those surveyed felt that their company has been successful at achieving its global expansion objectives over the past two years, compared to 20% who indicated “limited” success.

The global aspect of their strategic business plan was also expected to increase, with 39% indicating that global expansion is an integral part of their company's overall growth goals.

With respect to expansion overseas, the survey found that execs say economic factors in the US and abroad have the most impact on global expansion decisions.

In fact, with 45% saying the US economy is worse than last year, only 22% who responded to the GEI survey said it is better, and 68% expecting it will either be the same or worse next year, expansion overseas is being increasingly seen as a way to generate revenue growth.

As far as how they intend to expand overseas, half of the executives indicated that they plan to increase the number of vendors and distributors they work with, and 45% see an increase in partnerships, strategic alliances and joint ventures in their future.

Additionally, 38% are planning to increase hiring, while 32% have plans to add offices or physical plants.

For those surveyed, the average percent of revenues gained from overseas operations was 23%, with an impressive 36% of execs saying the percentage of total revenues generated from overseas exceeded 21%.

According to respondents, that percentage has been increasing and is expected to continue increase.

In fact, 48% indicated that non-US revenue as a percentage of company's total revenue has been up the past two years with 57% saying that the percentage of non-US revenue will increase over the next five years.

In reviewing the challenges to growing their global operations, regulatory barriers and regulations, language/cultural nuances, and hiring qualified personnel were the “most prominent” concerns.

What the execs saw as “very significant” risks were available capital, human resources issues, and geopolitical issues.

Global expansion has not resulted in a loss of US employee base, the survey responders said.

One-in-three respondents said that their employee base in the US has expanded as a result of global expansion and 53% indicated that global expansion has had no impact on their US employee base.

Overall, the survey found that 14% of employees are in non-US countries, though 38% of respondents expect to increase non-US employees in next five years.

The GEI engaged research firm Penn Schoen & Berland Associates to conduct the survey, which interviewed execs from companies that sell overseas, outsource company functions or processes, have partnerships or joint ventures, have plants or offices outside the US, use non-US vendors or distributors, or sells affiliated franchises to non-US companies.

The survey was conducted in 10 US cities: Atlanta, Baltimore, Denver, Detroit, Houston, Kansas City, Los Angeles, Philadelphia, Silicon Valley, and Stamford, Connecticut.

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