Seminar in Jordan 12-16 October 2003, Amman · Business Consulting Services | 6-Sep-11 | © Copyright IBM Corporation 2003 Introduction The bigger picture 3 Investor targeting & lead

Business Consulting Services

© Copyright IBM Corporation 2002

Plant Location International (PLI)

by Wim Douw

IBM – Plant Location International

Investor targeting & After care

Seminar in Jordan12-16 October 2003, Amman


© Copyright IBM Corporation 2003| 6-Sep-11 | WWW.IBM.COM/BCS/PLI2

Introduction Training overview

InitialList

(Brainstorm)

SecondaryTargets

(Re-active)

Exclude

Prime Targets

(Pro-active)

Matching supply & demand

Start with a long list of industries

Find unique location offer for particular

industries Review potential

sectors with economic

policy

Prioritize target sectors

Policy“Fitness”

Investors Demand

Location offer

Investor targeting

InitialList

(Brainstorm)

SecondaryTargets

(Re-active)

Exclude

Prime Targets

(Pro-active)

Matching supply & demand

Start with a long list of industries

Find unique location offer for particular

industries Review potential

sectors with economic

policy

Prioritize target sectors

Policy“Fitness”

Investors Demand

Location offer

Investor targeting


© Copyright IBM Corporation 2003| 6-Sep-11 | WWW.IBM.COM/BCS/PLI

IntroductionThe bigger picture

3

Investor targeting & lead

generation

Strategy & organization

(Pre-)investment services & facilitation

Post-investment services

Phase 1

Phase 2

Phase 3Phase 4

Moscow city IPA (MIPA)

Department of Industry& Science

Ministry of Economics & Trade

MIPABusiness

associations (SEMI)

Private sector

Universities

Embassies

Trade offices

Intermediary organizations

Private sector

MIPAGovernment

Administration

Law & accounting firms

Utility companies

Property developers / brokers

Educational institutions

MIPA

Trade associations

International chambers of commerce (AMCHAM,

EBC, JETRO, etc.)

Moscow region electronics industry

investment promotion cycle


Zelenograd SEZ administration




generation




Phase 1

Phase 2

Phase 3Phase 4


generation




Phase 1

Phase 1

Phase 2

Phase 2

Phase 3

Phase 3Phase 4

Moscow city IPA (MIPA)


Ministry of Economics & Trade

MIPABusiness

associations (SEMI)

Private sector

Universities

Embassies

Trade offices

Intermediary organizations

Private sector

MIPAGovernment

Administration

Law & accounting firms

Utility companies

Property developers / brokers

Educational institutions

MIPA

Trade associations

International chambers of commerce (AMCHAM,

EBC, JETRO, etc.)

Moscow region electronics industry

investment promotion cycle





Example of investment promotion cycle



BASIC PRINCIPLES OF COMPANY TARGETINGTargeting is a core activity of every agencies

Export promotion

Providing consulting

services

Promotion ofdomestic

investment

After careprogram

Investmentpolicy advice

Investortargeting

0% 20% 40% 60% 80%100%0% 20% 60% 100%

Exportprocessing

zones

Industrial estates authority function

Promotion of privatization

Foreigninvestment

licensing

Promotion of outwardinvestment

Foreign investmentregistration

Promotionof tourism

Grantingincentives

Source: UNCTAD survey among 100 IPAs



TARGETING AS AN EFFECTIVE APPROACH FOR LEAD GENERATION

Goals

Investments

Investment Approvals

Investment Applications

Investor Reconnaissance Visits

Meetings with Individual Prospective Investors

Investor Contacts Generatedby Promotional Activities

National Objectives

No. of Investments

No. of Project Approvals

Require

No. of Project Applications

No. of Site Visits

Require

No. of Meetings/Presentations

No. of Investor Contacts

Require

Require

Require

1,000 jobs

10 new investments

18 approvals

20 applications

100 site visits

1,000 meetings

10,000 contacts

Source: TSG



Table 1 Effectiveness of different promotional methods

Method

TARGETING AS AN EFFECTIVE APPROACH FOR LEAD GENERATION

Nb agencies using the method

Aftercare services for target firms 4 5.0

6 4.8

Links to chambers etc 4 4.1

Direct mail to targeted brokers 5 4.0

Sales representatives 3 4.0

PR Companies 3 4.0

Conferences, seminars 7 3.6

Outward missions 5 3.6

TV commercials 2 3.5

Organisations in source countries 2 3.5

Conventions, exhibitions 8 3.4

Trade press advertising 5 3.2

Direct mail to targeted companies 9 2.8

Inward missions 4 2.8

Directory listings 4 2.5

Average rating for lead generation (max score=5)

Links to target firms & networks



Potential sources of leads & marketing targets

Direct IndirectAt home Existing foreign company

base (after-care)Foreign embassies and economic representations of target countriesForeign chambers of commerce (AmCham, JETRO, etc.)Intermediary organisations working with foreign investors (international accountants, foreign banks, legal advisors, international property brokers, location consultants, etc.)Network of foreign venture capital investors in country/region.Professors and research institutes at local universities that work with foreign companies.UNIDO Investment & Technology officesEPZ authoritiesForeign expatriate clubs in countryEtc. etc.

Abroad HQs of companies in target sectorsLarge importers/ distributors

Relevant “trade” seminars & association meetingsEmbassies and national representations abroadTrade promotion organisationsForeign embassies in the ME regionIntermediary organisations working with foreign investorsUNIDO Investment & Technology officesCountries’ (expatriate) business community abroad Etc. etc.



Generating leads abroad: examples pro-active v re-active

Pro-active:Overseas representation network in key source markets:

Promotion activities (example of successful European IPA representation in the USA):- Existing investors – after care to help companies expand and develop in country.- Pro-active lead generation by telemarketing agency. (A significant proportion of the leads

comes in through a dedicated telemarketing service)- Has conducted 100 1-1 meetings with companies in the last year.- Meeting companies at conferences, exhibitions, trade-shows and organizing break-fast

meetings for targeted audience. - Referrals from consultants, bankers, chambers of commerce etc. (networking with

intermediaries)- Tap into personal network and meet new individuals at exhibitions and trade shows.

Marketing and networking mainly in selected target events.- Developing and sending brochures for each target sector in local language (eg French,

Italian, Spanish, etc.)

Re-active:IPA Website (key requirements: dynamic, relevant information, and up-to-date)

Networking is crucial!Networking requires proximity!



Successful targeting examples in Eastern Europe

Czech Republic, Hungary and Poland have been very successful. Success of these countries should be considered demand driven (opportunity for profit maximization in combination with EU access) rather than being a targeting success. However, very professional IPAs were established helping foreign investors in setting up and influencing the direction of inward investment flows.IBM-PLI study in Eastern Europe suggests a positive correlation between ‘structure’, ‘strategy’ and ‘resources available to implement strategy’ on the one hand and the number of foreign investments received by country.Investments from the US, Europe or Japan in the MEDA region seem mainly local market driven. Much less export platform investments (role of trade agreements) compared to Asia-Pac or Eastern Europe.



BEST PRACTICES IN TARGETING INITIATIVES

Full preparation of project teams before targeting project, to ensure a consistent and coordinated approach

Prepare proposition-based marketing materials and business cases tailored to specific target audience

Development of research tools and questionnaire templates to be used when meeting companies

Creative, opportunity-driven approach to canvass meetings with companies building on other national attractions (e.g. Golf in the case of Ireland)

Post-meeting evaluation and immediate follow-up proposals to be made to companies

Longer term follow-up and relationship building

Establishment of overseas offices or representatives is a key policy tool for moving to a pro-active targeting approach



OTHER KEY LESSONS

Sector based Targeting must be based on an intelligent sector-based investment promotion strategy.

Sustained approaches Targeting is not a one-off initiative. It is about sustained approaches and relationship building.

Not just investors Brokers play a key role in investment decisions, and investment ambassadors should be used.

Resource intensive In both time and in the role of overseas offices.

Is a learning approachTarget sectors need to be re-evaluated periodically. Improvements in the local ‘offer’ or ‘product’ should also be continuous.

To increase FDI organisational effectiveness, user tools, and marketing also need to be in place.

Is not stand-alone



Basic targeting tools:1. CITT2. Competitive position & Sales manual



DEVELOPING RE-ACTIVE AND PRO-ACTIVE MARKETING TOOLS

Objective: provide powerful, fact-based marketing messages and data to sell the location most effectively, presented in the latest user tools

Key actions• Develop practical user tools based on benchmarking exercise which may include:

• Sales manual containing all sales messages and

• Research Manual with all back-up data for the sales manual

• A sales manual provides fact-based, key selling messages aligned to investor needs. It includes:

• Typical critical investor requirements

• Key selling proposition

• Strengths and weaknesses

• Strengths and weaknesses of competitors

• Counter-arguments to be used in discussion with potential investors

• A Research Manual contains the data used in the benchmarking, fully referenced for updating, to be used for project handling, building brochures/business cases and responding to enquiries

Outcome: Practical user tools which can be used for marketing, investmentpropositions, presentations, project handling and training



1. Contact & Investor Tracking Tool (CITT)



Location Category

Weight (%)Location factor

Weight (%)

General business environment10Economic and financial stability101.0%

Political stability101.0%

Business ethics & bureaucracy50.5%

Quality of support from local government & development agencies101.0%

Business permitting procedures151.5%

Environmental protection regulations101.0%

Availability of financial support for setting up (incentives)252.5%

Corporate taxation151.5%

Total100

Local potential to recruit skilled staff20Overall size of labour poor102.0%

Presence of experienced manufacturing workers306.0%

Presence of experienced industry-specific employees255.0%

Presence of non-experienced staff (student population)102.0%

Service attitude51.0%

Competition for similar skills51.0%

Overall tightness in the labour market (unemployment)153.0%

Total100

Presence of industry20Market proximity (access to customers)5010.0%

Presence of automotive base5010.0%

Total100

Investor needs

Basic tools:2. Competitive position & sales manual

Database

Location CategoryWeight

(%) Location factorWeight

(%) Melbourne Adelaide Sydney Sao PauloToronto / Montreal Shanghai Prague

General business environment 10 Economic and financial stability 10 1.0% 7 7 7 5 7 7 5Political stability 10 1.0% 7 7 7 4 6 5 5Business ethics & bureaucracy 5 0.5% 8 8 8 4 8 4 5Quality of support from local government & development agencies 10 1.0% 8 8 8 4 8 5 7Business permitting procedures 15 1.5% 7 7 7 5 7 6 6Environmental protection regulations 10 1.0% 6 6 6 6 6 6 5Availability of financial support for setting up (incentives) 25 2.5% 7 7 7 8 6 4 4Corporate taxation 15 1.5% 5 5 5 6 6 5 5Total 100 60 58 62 45 59 49 47

Local potential to recruit skilled staff 20 Overall size of labour poor 10 2.0% 6 5 6 8 7 7 5Presence of experienced manufacturing workers 30 6.0% 6 6 5 7 7 6 7Presence of experienced industry-specific employees 25 5.0% 7 6 4 7 6 7 7Presence of non-experienced staff (student population) 10 2.0% 7 6 6 7 6 9 6Service attitude 5 1.0% 7 7 7 7 8 6 5Competition for similar skills 5 1.0% 5 7 6 5 6 8 8Overall tightness in the labour market (unemployment) 15 3.0% 6 6 4 6 5 7 8Total 100 52 51 46 53 53 55 53

Presence of industry 20 Market proximity (access to customers) 50 10.0% 5 5 5 8 8 7 7Presence of automotive base 50 10.0% 6 4 5 6 5 3 4Total 100 11 9 10 14 13 10 11

Language skills 5 Mastery of English (as corporate language) 25 1.3% 10 10 10 3 9 3 3Presence of native language speakers in other languages 50 2.5% 8 7 8 3 8 6 3Language skills of local population (if relevant) 25 1.3% 7 5 7 4 9 7 4Total 100 25 22 25 10 26 16 10

Flexibility of labour & regulations 10 Flexibility of staff 25 2.5% 7 7 7 7 7 5 5Working time regulations 20 2.0% 6 6 6 6 6 7 8Hiring flexibility 20 2.0% 5 5 5 6 7 6 6Firing flexibility 20 2.0% 7 7 7 8 8 6 6Social climate 15 1.5% 5 5 5 7 5 8 8Total 100 30 30 30 34 33 32 33

Infrastructure 20 Air access 5 1.0% 5 4 6 6 6 5 5Road access 20 4.0% 7 7 7 6 7 6 7Train access 20 4.0% 6 6 6 4 8 5 8Waterways and seaports 10 2.0% 8 7 7 3 8 7 4Public transport 5 1.0% 7 5 7 5 8 7 7Quality & reliability of telecommunications 10 2.0% 8 8 8 4 8 6 7IT infrastructure 5 1.0% 8 8 8 5 8 3 6Reliability of power supply 15 3.0% 8 8 8 3 9 6 6Water supply 5 1.0% 8 8 8 9 9 5 5Gas supply 5 1.0% 8 8 8 5 9 6 4Total 100 81 77 81 54 88 61 65

Real estate 10 Availability of large industrial sites 70 7.0% 7 7 6 8 6 8 5Availability of industrial space 30 3.0% 7 7 7 7 7 7 7Total 100 21 21 20 22 20 22 19

Living environment 5 Cost of living 40 2.0% 6 7 6 5 7 3 7Attractiveness for international recruits 30 1.5% 7 6 9 3 8 3 5Safety 10 0.5% 8 8 7 4 7 6 6International schools 10 0.5% 6 4 5 5 5 5 6Personal taxation for expatriates 10 0.5% 8 8 8 7 6 6 6Total 100 35 33 35 24 33 23 30

Total 100 1

Scoreboard

Overall weighted quality score

6.56.2 6.1 6.1

6.9

5.9 5.9

7.0

5.86.3

5.8 6.0 5.8 5.7

7.1

Melbou

rne

Adelai

de

Sydne

y

Sao P

aulo

Toron

to / M

ontre

al

Shang

hai

Prague

Stuttga

rt

Budap

est

Toky

oKua

la Lu

mpur

Monter

rey

Seoul

Bangk

ok

Detroit

Living environmentReal estateInfrastructureFlexibility of labour & regulationsLanguage skillsPresence of industryLocal potential to recruit skilled staffGeneral business environment

Total annual operating costs(in USD million)

16.5 15.318.0

9.1

20.0

5.98.5

31.3

7.1

32.0

8.3

13.4

17.3

5.1

27.3

Melbou

rne

Adelai

de

Sydne

y

Sao P

aulo

Toron

to / M

ontre

al

Shang

hai

Prague

Stuttga

rt

Budap

est

Toky

oKua

la Lu

mpur

Monter

rey

Seoul

Bangk

ok

Detroit

Total annual utility costsTotal investment costs expressed as annual occupancy costsTotal annual labour cost to employer for full operation

Quality & cost rankingsMelbourne

Brisbane

Sydney

Hong Kong

Bangalore

Dublin

Kuala Lumpur

Auckland

SingaporeManchester

Chicago

San Francisco

5.5

6

6.5

7

7.5

25 50 75 100 125 150 175

Operating cost index(average = 100)

Qua

lity

scor

e(S

core

from

0 to

10)

Competitive map

Sales Manual



Sales Manual

Melbourne

Brisbane

Sydney

Hong Kong

Bangalore

Dublin

Kuala Lumpur

Auckland

SingaporeManchester

Chicago

San Francisco

5.5

6

6.5

7

7.5

25 50 75 100 125 150 175

Operating cost index(average = 100)

Qua

lity

scor

e(S

core

from

0 to

10)

Competitive map

Overall weighted quality score

6.56.2 6.1 6.1

6.9

5.9 5.9

7.0

5.86.3

5.8 6.0 5.8 5.7

7.1

Melbou

rne

Adelai

de

Sydne

y

Sao P

aulo

Toron

to / M

ontre

al

Shang

hai

Prague

Stuttga

rt

Budap

est

Toky

oKua

la Lu

mpur

Monter

rey

Seoul

Bangk

ok

Detroit

Living environmentReal estateInfrastructureFlexibility of labour & regulationsLanguage skillsPresence of industryLocal potential to recruit skilled staffGeneral business environment

Total annual operating costs(in USD million)

16.5 15.318.0

9.1

20.0

5.98.5

31.3

7.1

32.0

8.3

13.4

17.3

5.1

27.3

Melbou

rne

Adelai

de

Sydne

y

Sao P

aulo

Toron

to / M

ontre

al

Shang

hai

Prague

Stuttga

rt

Budap

est

Toky

oKua

la Lu

mpur

Monter

rey

Seoul

Bangk

ok

Detroit

Total annual utility costsTotal investment costs expressed as annual occupancy costsTotal annual labour cost to employer for full operation

Quality & cost rankings

Location CategoryWeight

(%) Location factorWeight

(%) Melbourne Adelaide Sydney Sao PauloToronto / Montreal Shanghai Prague

General business environment 10 Economic and financial stability 10 1.0% 7 7 7 5 7 7 5Political stability 10 1.0% 7 7 7 4 6 5 5Business ethics & bureaucracy 5 0.5% 8 8 8 4 8 4 5Quality of support from local government & development agencies 10 1.0% 8 8 8 4 8 5 7Business permitting procedures 15 1.5% 7 7 7 5 7 6 6Environmental protection regulations 10 1.0% 6 6 6 6 6 6 5Availability of financial support for setting up (incentives) 25 2.5% 7 7 7 8 6 4 4Corporate taxation 15 1.5% 5 5 5 6 6 5 5Total 100 60 58 62 45 59 49 47

Local potential to recruit skilled staff 20 Overall size of labour poor 10 2.0% 6 5 6 8 7 7 5Presence of experienced manufacturing workers 30 6.0% 6 6 5 7 7 6 7Presence of experienced industry-specific employees 25 5.0% 7 6 4 7 6 7 7Presence of non-experienced staff (student population) 10 2.0% 7 6 6 7 6 9 6Service attitude 5 1.0% 7 7 7 7 8 6 5Competition for similar skills 5 1.0% 5 7 6 5 6 8 8Overall tightness in the labour market (unemployment) 15 3.0% 6 6 4 6 5 7 8Total 100 52 51 46 53 53 55 53

Presence of industry 20 Market proximity (access to customers) 50 10.0% 5 5 5 8 8 7 7Presence of automotive base 50 10.0% 6 4 5 6 5 3 4Total 100 11 9 10 14 13 10 11

Language skills 5 Mastery of English (as corporate language) 25 1.3% 10 10 10 3 9 3 3Presence of native language speakers in other languages 50 2.5% 8 7 8 3 8 6 3Language skills of local population (if relevant) 25 1.3% 7 5 7 4 9 7 4Total 100 25 22 25 10 26 16 10

Flexibility of labour & regulations 10 Flexibility of staff 25 2.5% 7 7 7 7 7 5 5Working time regulations 20 2.0% 6 6 6 6 6 7 8Hiring flexibility 20 2.0% 5 5 5 6 7 6 6Firing flexibility 20 2.0% 7 7 7 8 8 6 6Social climate 15 1.5% 5 5 5 7 5 8 8Total 100 30 30 30 34 33 32 33

Infrastructure 20 Air access 5 1.0% 5 4 6 6 6 5 5Road access 20 4.0% 7 7 7 6 7 6 7Train access 20 4.0% 6 6 6 4 8 5 8Waterways and seaports 10 2.0% 8 7 7 3 8 7 4Public transport 5 1.0% 7 5 7 5 8 7 7Quality & reliability of telecommunications 10 2.0% 8 8 8 4 8 6 7IT infrastructure 5 1.0% 8 8 8 5 8 3 6Reliability of power supply 15 3.0% 8 8 8 3 9 6 6Water supply 5 1.0% 8 8 8 9 9 5 5Gas supply 5 1.0% 8 8 8 5 9 6 4Total 100 81 77 81 54 88 61 65

Real estate 10 Availability of large industrial sites 70 7.0% 7 7 6 8 6 8 5Availability of industrial space 30 3.0% 7 7 7 7 7 7 7Total 100 21 21 20 22 20 22 19

Living environment 5 Cost of living 40 2.0% 6 7 6 5 7 3 7Attractiveness for international recruits 30 1.5% 7 6 9 3 8 3 5Safety 10 0.5% 8 8 7 4 7 6 6International schools 10 0.5% 6 4 5 5 5 5 6Personal taxation for expatriates 10 0.5% 8 8 8 7 6 6 6Total 100 35 33 35 24 33 23 30

Total 100 1

Scoreboard

Database

Basic tool:2. Competitive position & sales manual



EXAMPLESBenchmarking Database



Industry review in sales manual (example automotive industry)

EXAMPLES

• Behr (Germany)• Calsonic (Japan)• Tenneco (US)• Dana (US)• Delphi (US)• Eaton (US)• Lear (US)• Scania (Sweden)• Siemens (Germany)• TRW (US)• Visteon (US)

Key industry trends (OEMs)• Globalization (mainly through M&A and JVs)• High inventories• Excess capacity• Low net margins• Shift to E-business• Shift to emerging markets• Growing importance of branding• Concern over increasing supplier size and control

Key sales trends• Record sales last 2 years• Increased volume often driven by costly

incentives• Increased competitiveness has pressured new

car prices - hurting margins• Dealer network consolidation - changing buying

experience

Major investors globally 2000-Q2 2001• BMW (Germany)• DaimlerChrysler (Germany)• Fiat (Italy)• Ford (US)• GM (US)• Honda (Japan)• Mitsubishi (Japan)• Nissan (Japan)• Renault (France)Toyota (Japan)• VW (Germany)

Key FDI trends• 300 projects 2000-Q2 2001

• 50% components• 50% OEM

• Projects by type• Expansions important for

both OEM and components

• More greenfield projects are recorded for components

• Major source countries :• US (Michigan, Illinois)• Japan, Germany• France, Italy, Sweden

• Major locations• US• UK, Canada, Mexico• Brazil, China, Germany,

Czech Republic, Hungary, Poland, Australia, Spain

HQLogistics & Distribution

Manufacturing

R&D

Technical support

E-business trends• OEMs and suppliers are creating strategies for

the ‘New Economy’• Exchanges promise much, but suppliers worry• E-Business will impact the entire supply chain• All of the players will need to adapt to rapid

change

Key industry trends (suppliers)• Specialisation• Consolidation• Multiple OEM / Aftermarket demands• Margin / Price pressures• Greater OEM expectations (i.e. design /

engineering)






experience











Manufacturing

R&D

Technical support



change


engineering)






experience











Manufacturing

R&D

Technical support



change


engineering)





experience











Manufacturing

R&D

Technical support



change


engineering)

Mobile projects



Sales Manual

EXAMPLES



SalES Manual

EXAMPLES



EXAMPLESVictoria

Shanghai Victoria

Strengths• High market proximity• Large size of labour pool• Very high availability of large industrial sites• Very high number students, especially in engineering• Low competition for skills• Low tightness in labour market• Favourable working time regulations and hiring flexibility• Very low operating cost

Weaknesses• Size of automotive base• Flexibility of staff and firing flexibility• Very low levels of R&D• Road and train access• Language skills• Waterways and seaports• Telecoms and power supply quality and reliability• Overall business environment• IT skills• Attractiveness of location• Cost of living

Strengths• Very strong automotive base• Presence of experienced manufacturing workers• Strong presence of automotive employees• High numbers of students in engineering subjects• High R&D levels• Good road and train access• Good site availability• High flexibility of staff• Excellent IT / language skills• Labour market is not tight• Excellent general business environment & incentives• Excellent reliability oftelecoms & utilities• Attractiveness of location

Weaknesses• Competitor locations outside of Australia have better market access• Non Asia-Pacific locations have higher R&D• Working time regulations are more favourable in non-Australian competitor locations• Hiring flexibility is also more favourable in non-Australian competitor locations• Cost structure is higher than competitor locations, except Sydney• Air access

Defensive arguments• Victoria’s two major weaknesses are market proximity and operating costs - but only when competing against non-Australian locations• In terms of market proximity, Victoria has several persuasive counter-arguments. First, is the strong existing base and recent investments of final manufacturers including GM, Ford and Toyota and first tier suppliers including Delphi, Bosch and Dana [(B2.1-B2.3)]. There are 84 companies in the automotive sector in Victoria- higher than all major competitors [(Data Point C3.3j)]. Second, the Australian car market is larger than that of China, South Korea, and other major competitors [Data Point C3.1b)]. • In terms of labour costs, Victoria will not be able to compete for purely cost driven projects. However, the strength of the existing supplier base should facilitate cost savings in the supply chainand Victoria offers higher financial support than low cost locations. The strength of R&D should also be emphasised as this allows more flexibility for higher value added plant evolution. The overall business environment in Victoria is also excellent and there is significantly less risk compared to investing in low cost locations

BangkokStrengths

• High market proximity• Larger number of experienced manufacturing workers• Large size of labour market• Very low operating costs• Flexible working time regulations, hiring flexibility and good social climate• Very good air access• Low cost of living• Low corporate tax

Weaknesses• Smaller automotive base• Tightness in labour market• Lower presence automotive employees• Very low R&D levels• Availability of large sites• Flexibility of staff• Firing flexibility• Road and train access• Telecoms and power supply quality and reliability• Overall business environment• Language and IT skills• Attractiveness of location• Waterways and seaports



Other more advanced toolsProposition-based profitability / project evaluation software




Objective: develop profitability tools for calculatinghow locations compare in financial terms to be used in pro-active targeting

Key actions• Financial tool show rate of return of investing in location for specific projects• Calculate how much incentives to give• Quantify the impact of taxes and incentives• Competitor assessment and offer realignment• Pay back period calculations• Identifications of strengths and weaknesses in the overall financial offer• Sensitivity analysis to identify changes with most impact• Demonstrate understanding & expertise of investor needs & business model• Challenges the investor• Fine tunes requirements of the investor, to maximise impact of incentives

Outcome: Ability to demonstrate to the investor how your location will impact upon their bottom-line. Challenges the investor to consider you



EXAMPLES



Resource Allocation Tool




Objective: to assess optimal location and resource allocation of overseas offices

Key actions

• Identify key source markets in terms of:

• General size of outward FDI flows

• Specific outflow of investments in your target sectors

• After-care opportunities

• Cluster / Sector allignment

• Based on opportunities prioritise source markets in terms of resource allocation to this market (overseas office, staff, missions, etc.)

Outcome: Structured approach to select marketing priorities and optimizespending of annual marketing budget




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optimal resource

optimal resource

Australasia 60 22 19 5 29 0.063 43 17 14 1 14 0.017 1313 33 0.011 269 0.050 127 0.033 0.022 0.3 0.4 0.6Benelux 159 84 15 7 3 0.030 90 48 8 1 31 0.026 9887 155 0.062 327 0.050 197 0.042 0.035 0.5 0.7 0.9Canada 157 90 38 11 17 0.066 127 80 33 1 34 0.049 7404 59 0.032 2190 0.070 309 0.080 0.050 0.8 1.0 1.3Central Europe 435 234 58 29 28 0.136 318 172 45 1 111 0.093 30159 465 0.186 1845 0.080 341 0.083 0.115 1.7 2.3 2.9China 28 17 14 2 2 0.012 14 7 4 1 5 0.008 789 12 0.005 307 0.000 450 0.058 0.013 0.2 0.3 0.3East Asia 45 24 13 2 3 0.014 38 20 11 1 22 0.017 636 9 0.004 500 0.030 118 0.028 0.015 0.2 0.3 0.4France 228 115 24 17 11 0.067 160 81 21 1 55 0.046 27543 220 0.119 662 0.070 220 0.054 0.063 0.9 1.3 1.6India 46 19 5 1 9 0.020 37 17 4 1 4 0.011 36 5 0.001 816 0.030 241 0.046 0.014 0.2 0.3 0.3Japan 333 135 54 17 6 0.071 240 96 41 1 212 0.071 11064 102 0.051 925 0.070 141 0.047 0.065 1.0 1.3 1.6Scandinavia 231 152 39 6 5 0.043 154 103 28 1 35 0.054 11366 135 0.060 882 0.070 185 0.052 0.054 0.8 1.1 1.4South East Asia 36 12 6 2 1 0.008 31 10 4 1 10 0.009 842 11 0.005 666 0.030 295 0.051 0.013 0.2 0.3 0.3Southern Europe 134 83 11 6 2 0.025 54 32 6 1 30 0.019 4385 97 0.034 1229 0.030 320 0.060 0.027 0.4 0.5 0.7New England 258 183 71 2 8 0.051 233 168 63 1 29 0.093 22000 140 0.086 1497 0.090 29 0.045 0.082 1.2 1.6 2.1Mid East 381 254 88 8 12 0.079 312 201 77 1 98 0.116 22000 140 0.086 4586 0.090 66 0.079 0.103 1.5 2.1 2.6Great Lakes 248 184 66 30 28 0.133 202 150 51 1 91 0.084 22000 140 0.086 4164 0.090 39 0.072 0.088 1.3 1.8 2.2South East 224 150 63 6 10 0.057 160 110 50 1 63 0.069 22000 140 0.086 4684 0.060 120 0.078 0.072 1.1 1.4 1.8Far West 630 442 164 11 15 0.125 557 403 152 1 63 0.219 22000 140 0.086 5680 0.090 87 0.092 0.170 2.6 3.4 4.3TOTAL 3633 2200 748 162 189 1 2770 1715 612 17 907 1 215424 2003 1 31229 100% 3285 1 1 15 20 25

Cluster alignment

10

Optimal resource allocation (theoretFDI opportunity general After care opportunityFDI opportunity in target

sectors

10 60 20



EXAMPLE: OVERSEAS OFFICE ASSESSMENTHQs in target sectorsHQs in target sectors

Location of competitor IPA officesLocation of competitor IPA offices



Cluster Management Tools



Cluster management toolsObjective: to map specific clusters to identify inward investment,

technology linkage and joint venture, alliance opportunities

Key actions

• Map the existing cluster, including companies, universities, and science parks

• Identification of companies and universities seeking foreign partnerships

• Technology and innovation audit to identify key competencies of location

• Development of marketing tools for managing and promoting the cluster

• Examples of cluster-based inward investment approach:

• Midlands in UK (region with 10 million people; focus on healthcare and IT sectors)

• Denmark (focus on ICT and Biotechnology sectors)

Outcome: Ability to demonstrate to the investor how your location will impact upon their bottom-line. What skills are available in the region.

Challenges the investor to consider you



University

Incubator (biotech)

Science parkIncubator (software)

Incubator (engineering)

1. Idea 2. Start-up 3. SME growthEndogenous (domestic)

Exogenous (foreign)

1. Research alliances

2. Spin-offs & firm alliances

3.Inward investment

• Leverage innovation base

• Technology development

• New firm creation

• SME growth

• Quality inward investment

• Embeddedness

• Critical mass

Key economic outputs

• Audit research competence• Market to foreign companies• Facilitate research alliances

• Audit start-up competence• Market to foreign companies• Facilitate spin-offs & alliances

• Benchmark location competence• Market to foreign companies• Facilitate inward investment

Key actions

• Audit research competence• Support/incentivise spin-outs• Access funds for universities

• Create incubators• Business services to start-ups,• Encourage networking

• Audit company base• Create science parks• Product development • Business support to SMEs

Key actions

EXAMPLES



Active Cluster Management Tool

Searchable and fully interactive database of:- Companies in cluster- R&D competencies- Science parks and incubators

Full profiles of companies, R&D and science parksCan be searched to find R&D and corporate partners for foreign companies and universitiesCan be used to find specific technological competencies of the location, for pro-active promotionReflects shift towards micro/technology focused company targeting in the most advanced locations

EXAMPLES



Role of the IPA



The role of the IPA in the decision making process

1. The corporate perspective

2. Common & best practices

3. Intermediate point of view



1. Define Project Assumptions and Long-list of Location Options1. Define Project Assumptions and Long-list of Location Options

2. Analyze Long-list of Candidate Locations Identify Shortlist


3. Evaluate Short-listed Locations Select Preferred Location


4. Due Diligence and Negotiations4. Due Diligence and Negotiations

Main geographical focus

Nat

iona

lLo

cal

5. Implementation5. Implementation

1. The corporate perspectiveInformation provision & marketing services by IPAs



Location Decision Process ‘Information’ Requested by Investor

IPA Marketing activities & Services

• Familiarity with and/or perception of location• Previous contacts with IPA’s• Key data available on business conditions &

existing investors

1. Define Project Assumptions and Long-list of Location Options




4. Due Diligence and Negotiations




• Location marketing through IPA HQ and overseas representations:

• Professional & dynamic website• Conferences & seminars• Company meetings• Investor targeting campaigns• Investor perception surveys• Marketing mailings:

• General marketing materials (brochure, video, CDrom, news letter etc.)

• More specific marketing materials (sector reports, general investment guides, etc.)







• Direct contact with agency by investor or consultant:

• Need for comparative data on cost factors and qualitative factors

• Inquiry could be made at national or regional level









• 1. Investment Promotion Network • IPA needs to be well networked and known

among other intermediaries (e.g. other public bodies, banks, real estate agents, etc. that could be used by investor as entry point)

• 2. Inquiry handling structures & tools • Key account manager• High quality request handling procedures• Sector specific investment guides, • Up-to-date information databases• Sales manual, etc.







• Direct contact with IPA by investor or consultant:• Detailed financial & qualitative evaluation• Validation of comparative data• Site visits + interviews• Additional data gathering (need greater

detail or specific location information)









• 1. Visit handling structures • Tailored marketing materials, presentations &

tools:Key selling messagesBid bookFinancial evaluation tool

• Coordination of fact finding trip:interviews site visits5. Implementation5. Implementation




Location Decision Process‘Information’ Requested by Investor


• Direct contact with IPA by investor:• Concrete incentives proposal• Intangibles• Visit by senior management before final

decision.










• Agency keep contact with investor to follow up each additional question

• Agency introduce investor team to senior local or national officials






• Direct contact with IPA by investor:• Implementation assistance• Supplies










• Implementation support services:• Incentive procedures• Land acquisition• Site & building permits• Work permits• Etc. etc.

• Provide introduction to key suppliers:• Property developers• Recruitment agencies• Equipment suppliers• Etc. etc.

• Ongoing support & After care!





Generally speaking the investment promotion agency responsible for a particular location is best positioned to deal with investors’ inquiry

Step in location decision process

Overseas offices of N or R IPA

National IPA Regional IPA

Local IPA

Step 1: Define long-list

Step 2: Analyse long-list

Step 3: evaluate short-list

Step 4: Due diligence

Step 5:After care



2. Common & best practices –Most common investment promotion structures

N

National IPA onlyOften in LDC’s or very

small countries:

Ethiopia, Tanzania, Luxembourg, BOI’s in

Thailand, Pakistan, etc.

National & regional IPA network:Most common structure in both

developed and developing countries

However, this model works only well when professional project handling structures are installed at all levels.

Federal & local IPA’s:e.g. in USA, Switzerland,

Germany

N

R

R

R

RL

L

FF

F

F

LL

SEZ Techno pole SEZ

Techno pole



2. Common & best practices –Best practice case - UK

UK Government

ForeignOffice

Department ofTrade & Industry

Scottish and Welsh

governments

BTI Invest.UK

English RegionalDevelopment

Agencies

NationalDevelopment

Agencies

Committee onOverseas Promotion

Private sector

Sub-regional Authorities and Agencies



ISA has a sophisticated approach to marketing which integrates efforts at the regional, national and international levels in a highly targeted fashion to promote the growth of advanced clusters

ISA adjusts its target sectors over time (a ‘learning organisation’), in response to changing market conditions, competence and ISA value added

Target sectors Regions Overseas offices

Healthcare

Hub Sweden

Wood processing

IT/mobile communications

4 Swedish regions

20 Swedish Regions

12 Swedish regions

5 Swedish regions

US, Japan,Taiwan, UK, Germany, France

US and Europe

Germany, Scandinavia, Japan

Japan, Europe and US

The ISA develops sector projects.It is up to regions if they want to participate in a project. If so, they

have to commit resources and

people.

2. Common & best practices –Best practice case - Sweden



2. Best practice cases – general principles

Investors often lack proper understanding of Investment Promotion structures available within a country

Co-operation between national and regional agencies should preferably be formalised to be able to optimally serve existing and new investors. Issues to be considered when organising investment promotion on a national and regional level include:

- allocation of leads

- project handling

- ongoing support & aftercare

- reporting requirement

- transfer of personnel for training and networking

- joint marketing initiatives

- investor offer



3. Intermediaries point of view

Where possible, prefer to work immediately with the regional authorities concerned, without national IPA involvement.

Often inform the national agency that regional agency has been approached. Or in case of a highly strategic investment project prefer to have national agencies’ involvement.

Lack of proper inquiry handling procedures, knowledge management and visit handling procedures at IPAs influences quality and speed of an IPA’s response.

Key issues if working with regional agencies relate to the local versus international focus: Although regional agencies are preferred, the use of these agencies depend on inquiry and visit handling structures. If these are insufficient than national agency is preferred partner to work with

Sometimes find lack of international perspective with regional agency staff to deal with large corporate investors

Sometimes find lack of proper promotion material and important location information in English to serve international investors.



Contact Details IBM-PLI

Wim DouwSenior consultant+32 2 416 5407 [email protected]

IBM Business Consulting Services –Plant Location International:

Key practice in IBM BCS globally for economic

development & investment promotion services

Head office in Brussels and a New York office

30 dedicated consultants as part of a multinational, multidisciplinary team

Over 40 years of experience providing advice to multinational companies and IPA’s

Global capability – two-thirds of our corporate clients and one-third of our government agency clients are outside of Europe

Conducted 500 location assessments in 2002

mailto:[email protected]

Documents

Seminar in Jordan 12-16 October 2003, Amman · Business Consulting Services | 6-Sep-11 | © Copyright IBM Corporation 2003 Introduction The bigger picture 3 Investor targeting & lead