RDAs: Tailor Site Selection to Capabilities not Industries
By Paul J. Kleijne
The key factor in site selection is the function a company plans to conduct, not the business they are in.
The following are not value propositions:
*An excellent telecom infrastructure
*A top-notch electronics cluster
*An unparallelled quality of life
*Ample hobby opportunities, whatever that may be
Have you ever noticed that all advertisements by economic development agencies look alike? The preceding points are not value propositions at all; they are merely a random list of alleged location advantages at best.
Maybe the time has come for regional development agencies (RDA’s) to take a closer look at their capabilities and tailor those to the needs of potential investors around the world. Starting today.
It’s the Business Function, Stupid
For starters, marketing an economic region is not about selling industry sectors. There, I said it. The lion share of RDAs trying to sell themselves claim to have a strong IT, automotive, food cluster or what have you, while companies in those sectors are setting up national or regional headquarters, warehouse operations or customer care centers. To me it seems those regions are good at hosting office, services or logistics functions. Operations such as these are based on totally different starting points, and are not or hardly linked to specific technology clusters or industry sectors. Starting points, which are also called location factors, include either cost or soft factors. Companies love them, assess them, weigh them, rate them, rank them. And then decide on the location that best matches these requirements.
When corporations begin looking for a new location to meet their expansion plans, they’re always looking for the right place for a specific business function, such as logistics, manufacturing, headquarters, data centers, R&D, etc., or a combination of these functions. The industry sector they’re in is not relevant, or less relevant in that decision (the only exceptions to this rule will be discussed below). A food company will not be interested in an area’s food chain when it plans to establish its European headquarters, for example.
Depending on the business functions involved, these companies will be looking at how to bring their feedstocks in, move their finished products out, where to find the right personnel or the best accessibility to their major markets, etc. Therefore, attracting companies is about bringing to market the solid location factors that a region actually has to offer at the end of the day. The first question should always be: “What kind of operation are you planning to establish?”; not “What business are you in?” Nothing more. Nothing less.
Do the Mat(c)h
Finding the commonly used location factors for the limited number of regular business functions is not hard to do — listing the top three or five for every function will be more than sufficient. To objectively establish if, how and to what extent your area is able to match those location factors can be a lot more difficult. Talking to current investors in your region will be extremely helpful. It takes courage to admit that some demands (good roads, proximity to golf course) cannot be met. And if you’re lucky you will find qualities within your area you didn’t even know existed or were not asked for. Save those for a rainy day. You will discover that the abilities to deliver or underperform can be qualified as: emphasize (required/matched); nice to have (not required/matched); downplay (required/not matched), and don’t worry (not required/not matched).
There are two exceptions to the basic industry sector rule: R&D and manufacturing. These are the two business functions where the industry sector matters when trying to lure companies to your region, although the concept of location factors still exists to apply: match your supply, if applicable, to the corporate demands. This will obviously not surprise you, since the location factors for these functions lie within the core of the technologies they represent. An R&D operation of a medical technology company does not benefit at all from food research institutes; an automotive plant will not exactly source its parts form a well-developed pool of chemical suppliers.
And One More Thing
The beauty of all this is that, once the location factors of your area have been pointed out, it will be clear that the ingredients for a value proposition (i.e., website, advertisements, brochure, presentation slides, etc.) are at your fingertips. It’s plug and play. Never a dull ad again. And lots of investors.
Paul J. Kleijne is a partner of ARCUSplus International Business Development, www.arcusplus.com. The company is an international business consultancy firm, specializing in lead generation and business development for global operating businesses and economic development agencies. The company has worked with logistics service providers and economic development groups in Europe, North America and Asia to facilitate cross-border business.
Illustration by KROMKRATHOG at Free Digital Photos.net