As employment and wages in the U.S. rise and the dollar continues to gain strength, the U.S. market has become increasingly attractive to manufacturing and distribution companies, according to an annual survey gauging middle market sentiment conducted by McGladrey, a leading provider of assurance, tax and consulting services focused on the middle market.
Based on responses from 1,660 manufacturing and distribution executives around the world, McGladrey’s 10th annual Manufacturing and Distribution Monitor survey found middle market manufacturers and distributors are bullish on growth prospects for the next 12 months. A strong majority of executives reported growth in domestic sales over the past year and they expect median sales to increase 5% during the next year.
In a recent interview, Karen Kurek, national industrial products practice leader for McGladrey, said this year’s sample set was expanded to include non-US respondents, which constituted about 35% of survey responses. She noted that non-US companies are out-investing US companies in several areas, including equipment, facilities, R&D and IT. In general, non-US companies’ investment levels are 2-3% higher, but with sample base of 1,600, Kurek said the figure is statistically significant.
“That’s a wake-up call that US companies need to invest in IT and do it successfully,” Kurek said. “After 2009, most IT investment was just to keep things running, and now we’re starting to see a lot of those companies invest in more strategic way.”
Another interesting insight from the Monitor indicated that non-US companies are more comfortable in dealing with global commerce. Some 30% expressed goals to expand sales outside of their home countries, whereas in the US just 10% are looking to expand sales outside the US.
“Non-US companies have to rely on those technologies to sell their products and need proper IT to facilitate those transactions,” Kurek said, “as opposed to US-based companies that tend to serve local markets and might rely a bit more on feet on the ground.”
For U.S. and non-U.S. companies alike, the United States is the most common market currently served, the market most likely targeted for new sales efforts this year, and the market from which companies expect the most significant increase in sales in 2015. “Ten to 15 years ago, the BRIC countries were the emerging economies,” Kurek said. “A lot of those countries have had some significant economic downturns. Companies are now looking to the US because it’s a big market, and even though there’s not been tremendous GDP growth over last five years, it has at least been steady.”
One section of the survey focused on data security, where 75% of participants reported their companies have had no security breaches. Kurek suggested that these companies feel they are not at risk, but more than 60% stated they are only somewhat or not at all confident that they have the ability to monitor and safeguard sensitive customer data from unauthorized access.
“They don’t believe they are a target since they don’t have mass info or credit card info, but the fact is that they still have employee Social Security numbers and intellectual property,” Kurek said. “We have seen increased attacks on mid-market companies, who need to be diligent about protecting their systems. It’s not a matter of deploying some software and assuming you are okay.”