No business wants to navigate a recession. In fact, according to Zapier, “1 in 5 technology companies report that they do not feel prepared to weather a long-term recession.” However, while the challenges posed by recession may rock the boat for some companies, others may find market expansion success — but only if they make informed, value-based decisions in opportune markets. The bottom line is that recession is tricky, but it can represent opportunities for firms who know how to validate their data.
This is our third article in a series on the challenges and opportunities of tech companies looking to capitalize on the benefits of U.S. market entry. Here we will specifically address the concerns and potential wins that can accompany the changing tides of the economy.
The U.S. Tech Market and the Recession
Across the board, financial institutions are not recommending a wait-and-see approach to this recession. At Kettering International, the high note of this conversation is the same as all client conversations we have: your strategy, whether crafted for execution during recession or boom times – hinges upon your company’s data, position, and planning. That said, let’s talk about what we can expect.
The devaluation of inflated pricing is ushering in a back-to-basics approach across virtually all industries. Investments will be leaner and more calculated as the market traverses unknown waters. In some ways, this paradoxically levels the playing field, where the entry levels of acquisition become accessible again for any company with the acumen and resources to capitalize on the opportunity, rather than odds being stacked in favor of larger conglomerates.
All companies, institutions, and start-ups will need to utilize enterprise technology to upkeep market versatility and client satisfaction. Gartner predicted that global IT spending would increase by 3% to $4.6 trillion in 2023, indicating that even with the current constriction, the IT market is still robust. While hardware spending is down, software and IT services have increased by 9.6% and 6.2%, respectively. Additionally, enterprise technology can be cost-reductive and value-positive. This can be an advantageous sign for your market expansion plan.
Allocating funds for technology purchases and services is a necessary investment in the future, sheltering enterprise tech in a potentially recession-proof position. Investors in the U.S. tech market are most optimistic about the software industry, trading close to its 3-year average PE ratio of 55.8x. The tech industry is forecasted to maintain growth; some approximate 16% annually. This calls for discernment and shifting into creative solutions to meet the market’s needs, which are still climbing. The opportunities for expansion will be specific to verticals and regions. To pivot or profit, vetted on-the-ground observations are key to navigating market changes and validating lucrative launch timing.
Making It to the Other Side of a Recession in the Tech Industry
Most experts agree that the U.S. market will make it to the other side of this global recession first. For this reason, tech companies looking to explore international market entry can view the recession as an opportunity and take this slow-down as prime time to plan. Uncertainty is destabilizing, yet it allows for the reconsidering of possibilities. Launching during an approaching upward market swing with a strategic framework and planning can be incredibly lucrative. While some companies will choose to batten down the hatches and hold off on expansion, some will harness market exploration to plan an effective move into a market updraft.
If your tech firm’s native U.S. competition is struggling through the recession, as many are, you can take the initiative to set up operations and lay the groundwork for U.S. entry now. Evaluating where and why the competition is struggling can provide key insights for your own market entry analysis. If the data indicates a favorable expansion for your business, your positioning could potentially absorb and capture growth opportunities from businesses that did not make it through the recession.
Of course, the question of whether or not firms within a specific technology sector will do well to begin expanding to the U.S. during the recession is only answered by insider knowledge of how their local competitors are faring. A recession requires making plans, not assumptions. And a successful rollout is only possible when a firm commits to developing a comprehensive strategy rooted in region-based performance assessments and incisive data investigation.
Kettering excels at substantiating your metrics so you can thoroughly vet a proposed market launch. When the right timing arrives for an official launch, you are primed for success while your competitors are still rebounding and reorienting from the very economic challenges you’ve turned into opportunities.
How Can Kettering Help?
With an expansive network of resources in many technology sectors, Kettering leverages in-depth local market knowledge to analyze the statistical data for each client’s competitors and their performances during the recession. Kettering also provides the guidance and support necessary for tech firms to take advantage of a potentially game-changing opportunity for U.S. market entry.
Call Kettering today for more information on how this international market-based moment can best be leveraged for your company’s recession-resistant planning. In our next article, we will explore the key considerations of tech firms considering U.S. market entry expansion.