How Your Community Is (Or Isn't) Being Evaluated
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(Or Isn't) Being Evaluated for Foreign Direct Investment (FDI)
Your Hosts
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Ben WrightCEO, Atlas Advertising
www.twitter.com/atlasad
Douglas van den BergheManaging Director
Investment Consulting Associates
Guillermo MazierBusiness Development,
Atlas Advertising
[email protected]/atlasad
About Atlas
Atlas Advertising helps economic developers reach national and international prospect and site selection audiences. We deliver branding, website development, GIS mapping, research, social media, and creative services professionally and with a staff experienced in economic development. Unlike firms with little or no economic development experience, Atlas Advertising uses a proven mix of economic development marketing tactics that generate interest from site selection audiences.
Atlas Advertising is led by a former economic development practitioner and has worked with 70+ different economic development clients in nearly 40 US states and six countries.
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with 70+ different economic development clients in nearly 40 US states and six countries. Our approach and experience means that our campaigns generate an average of three to ten times the response of other campaigns.
Featured clients:
– State of Ohio
– Nogales, Mexico
– City of San Francisco
– Greater Phoenix Economic Council
– Greater Omaha Economic Development Partnership
– Webster City, Iowa
About Investment Consulting Associates
Investment Consulting Associates (ICA) is an independent adviser to companies optimizing their global supply chains and location portfolios. ICA also supports governments in building and enhancing their Foreign Direct Investment (FDI) and economic development strategies. Through our global partner network and multi-disciplinary approach we can assist our clients with an integrated package of service offerings.
Our business philosophy is to utilize smart and efficient software solutions in providing dedicated and tailored consulting services. LocationSelector.com and
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providing dedicated and tailored consulting services. LocationSelector.com and ICAincentives.com are two of our flagship web based products for companies and governments assessing and benchmarking the competitiveness of global business locations and optimizing their incentive potential. This unique service offering differentiates Investment Consulting Associates from traditional management consulting firms who are active in the field of investment promotion and corporate site selection services.
Many of our clients are ranked among the world’s 500 largest companies, but we also advise midsized businesses, nonprofit organizations, and government agencies. Our global track record supports our mission to become world leader in FDI advisory.
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• View and share the slides with your colleagues
(available now):
http://bit.ly/fQB6hC
• View and share the video with your colleagues (Will
be posted later this week): http://bit.ly/fjc3Ex
Introducing the Atlas / ICA
FDI Master Plan.
Work with Atlas and ICA jointly to create your future
FDI master plan. An FDI master plan includes:– A road map for short, medium and long term FDI success for your
community
– Best practices for servicing global business location decision makers
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– An assessment of current strategy and target markets
– Recommendations for target investor countries/regions, based on your target industry profile
– Platform to benchmarking your community with other communities/countries around the world
– FDI marketing and communications plan
– Tips for partnering with regions or states
Audience Question:
Have you worked on projects that
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Have you worked on projects that
are expansions or relocations of
foreign owned companies this
year?
Outline
1. Why FDI should be an important part of your strategy today
2. Challenges you face currently in FDI attraction
3. Trends in FDI in the United States
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3. Trends in FDI in the United States
4. How foreign-owned companies evaluate communities today: Current case studies
5. Q+A
Why FDI should be an important part of
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Why FDI should be an important part of
your strategy today
White House Touts Growing Foreign Direct
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Growing Foreign Direct Investment In The U.S.“At a time where we need to use every tool in our toolbox to continue to put Americans back to work and grow the economy here at home, promoting foreign direct investment is an important opportunity to accelerate our economic recovery,” President Obama said in a written statement.
Labor Availability and Quality Peak in the United States
FDI is growing again, and
projected to grow
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Source: UNCTAD FDI Database
Further the US is the global leader in inflows and outflows
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Audience Question:
What are your objectives for FDI
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What are your objectives for FDI
in the coming year?
Challenges you face
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Challenges you face
The federal government plays a
limited role in FDI promotion
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Foreign owned companies know just a handful of US destinations
• New York
• San Francisco
• Los Angeles
• Dallas
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• Dallas
• Miami
There can be a significant language barrier for foreign owned companies
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Comparing individual cities within countries can be difficult
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Audience Question:
What tactics have you found to be
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What tactics have you found to be
successful in overcoming these
challenges in your community?
Trends in Foreign Direct Investment
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Trends in Foreign Direct Investment
Global FDI trends – regional differentiation
• 20 Years ago – shift from Bi-Polar to Tri-Polar according
first World Investment Report
• Currently – shift from Tri-Polar to Emerging Markets (EM)
• Role of European Union in world outward FDI stock
decreased (from 85% in 1990 to 70% currently)
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decreased (from 85% in 1990 to 70% currently)
• Japan no longer qualifies as a Tri-Polar “pole” (at least 10%
FDI global outflows)
• The Share of the top 20 EM’s in Global FDI Stock rose from
6% to approximately 15% between 1990 – 2010
• The position of the United States will be challenged by
the EM’s, but there are also positive signs
Implications for the US
• US Competitiveness for FDI “Revival of the US
Manufacturing Powerhouse”
• Repatriation and Re-shoring of US companies and
business activities
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business activities
• Market Seeking: Traditional markets EU still of
importance
• Changing Target Markets – Increased importance of
Emerging Markets especially for Greenfield
investments
Anecdotal evidence – examples of re-shoring activities in the US
• Ford Motor Company and Wham-O (the makers of the Frisbee®) are
cited as having already brought production back to the U.S.
• Germany-based Automaker Quaprotek USA invests $22 Million in a
new Tennessee facility that brings over 120 jobs to the area.
• Presair, a manufacturer north of New York City, will return production
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• Presair, a manufacturer north of New York City, will return production
of its switches from China by this Fall, 2011. The reasons included long
lead times for product and the tying up of capital needed for expansion.
While Presair will see its costs jump 8% with the move back to the
U.S., its CEO Art Blumenthal believes those higher costs will
evaporate with the rising costs of manufacturing in Asia.
• NCR plans to begin a second production shift, which will result in a
total of 800 new (re-shored) jobs to Columbus, Georgia.
Volatile FDI trend pattern
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Growing importance of EM countries for Greenfield investments in the US
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Source: Organization for International Investment 2011
Top countries by US Greenfield Investment Job Creation – and Industry Sector Analysis
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Source: Organization for International Investment 2011
Global FDI drivers and trends – a future forecast
Exploiting different factor endowments
Supply chain optimization
Market seeking Resource seeking Efficiency seeking Strategic-asset seeking
Enhancing synergies (i.e.
technology, marketing channels and
management expertise
Raw materials,Energy sources
following customers,suppliers or competitors abroad
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1994
$256 billion2007 record
$1,833 billion
Relocation/
Expansions/
Offshore/sourcing CRISISCRISIS2013
$1,8 billion
Audience Question:
What country or countries are you
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What country or countries are you
most aggressively targeting?
How foreign owned companies evaluate
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How foreign owned companies evaluate
locations: A recent case study
Site visitsJournals
NewspapersBrochures
Trade Shows
City
City
1990 location selection process
SIX MONTHS
City
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City
City
City
City
City
CityCity
2011 location selection process
85% of initial search = Internet
EIGHT WEEKS
Detailed info
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Services
Corporate investment routemap
Implementation
Client
• Input cost model
Phase 2Phase 1 Phase 3 Phase 4 Phase 5• Resources for
site visits• Define real estate
objectives and accommodation needs
• Define project and goals• Business requirements
• Project assumptions
Strategic Assessment Location Screening, modeling & benchmarking
Cost comparison Community Evaluations
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Consultant
• Prepare site visits• Prepare discussions
with relevant governments and service providers
• Incentive negotiations• Real estate transaction and
acquisition support
Real estate supportSite visitsProject definition & understanding of
strategy
Comparison of costsAnalysis and comparison of locations
• Set up cost model• Cost differentials
between locations
• Determine geographic scope
• Selection of location factors
• Weighting location criteria
• Data gathering• Build model for location
analysis• Present rankings of
locations• Sensitivity analysis• Exploration of
incentives
A New Generation in FDI Advisory
Project details – Case Study
company ABC
• Company “Bulk and Specialty” has taken over parts of company Y operation in
US State I.
• Operations and machinery may have to be relocated (factory and warehouse).
• The company is exploring opportunities to set up a new manufacturing plant in
other parts of the US, Mexico or possibly China. The machinery and equipment
of the new acquired firm in US State I will be transported to the new location.
The estimated investment is:
Phase 1
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The estimated investment is:
– Land €3,000.000
– Building €6,500.000
– Machinery & equipment to be moved from an existing site €3.500.000
– New machinery & equipment €2.500.000
– Employees 50-75 (fte) with 2-3 shifts
• The main question company “Bulk and Specialty” is facing: Should we keep the
operation in US State I, or is it worthwhile to relocate within the US, Mexico or
even China
Case study: company ABC
Business drivers and challenges – Chemical Industry
• High impact of energy of and feedstock costs
• Limited growth potential in current US State I due to
saturated markets and demographic impacts
Phase 1
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saturated markets and demographic impacts
• Migration of more and more customer-industries to low-cost
countries
• Growing commoditization
• New competitors from Asia and Middle East: pressure on
margins
• Increasing regulations
Scenario approach
1. Base case scenario: stay in US State I
2. Supply chain effective scenario: Relocate to Mid-West
Illinois – Missouri – Iowa - Ohio
3. Labor cost effective scenario: Relocate to Mexico
Phase 1
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3. Labor cost effective scenario: Relocate to Mexico
Mexico
4. Overseas offshore scenario
China
A New Generation in FDI Advisory
Location factor groups
BUSINESS ENVIRONMENT
FACTORS
LABOR COSTS FACTORS
REAL ESTATE FACTORS
TAXATION & CUSTOMS
GRANTS & INCENTIVES
The following location factor groups were incorporated in the analysis:
Phase 2
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LABOR AVAILABILITY
LABOR PRODUCTIVITY
ACCESSIBILITY FACTORS
COUNTRY REPUTATION
SUPPLY CHAIN MANAGEMENT
GRANTS & INCENTIVES
QUALITY OF LIFE
ENVIRONMENTAL COSTS
EVALUATION
BUSINESS RISKS
ELECTRICAL POWER
Benchmarking techniques –LocationSelector.com
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Financial due diligence
(All Amounts in € 000's)
CountryRegion Location A Location B Location C Location D Location E L ocation F
Markup 23.564.146 23.469.997 23.467.757 23.783.983 23.788.567 23.288.296 Cost of Sales
Raw Materials 18.000.000 18.000.000 18.000.000 18.000.000 18.000.000 18.000.000 Chemical Duties/Tariffs 304.000 304.000 304.000 304.000 304.000 190.000 Material Transportation 2.400.000 2.400.000 2.400.000 2.700.000 2.700.000 2.300.000 Electricity 72.120 72.120 72.120 84.360 84.360 93.600 Salaries & Wages 244.710 173.546 171.853 163.066 166.531 189.000 Payroll Tax & Employee Benefits 63.624 45.122 44.682 42.397 43.298 49.140
Depreciation Expense 1.357.590 1.357.590 1.357.590 1.357.590 1.357.590 1.357.590 Total Cost of Sales 22.442.044 22.352.378 22.350.245 22.651.412 22.655.778 22.179.330
Phase 3
Logistics
Duties
Tariffs
Utilities
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Gross Margin 1.122.102 1.117.619 1.117.512 1.132.571 1.132.789 1.108.966 Taxes 269.305 268.229 268.203 271.817 271.869 266.152
Net Income 852.798 849.390 849.309 860.754 860.920 842.815
Total Expenses (Incl. Taxes) 22.711.348 22.620.606 2 2.618.447 22.923.229 22.927.648 22.445.482 (All Amounts in €000's)
CountryMetric Location A Location B Location C Location D Location E L ocation FNet Present Value 2.933 2.920 2.920 2.964 2.965 2.895
Rank 3 4 5 2 1 6
Internal Rate of Return 19,4% 19,4% 19,4% 19,5% 19,5% 19, 3%Rank 3 4 5 2 1 6
Total P&L Expenses 22.711 22.621 22.618 22.923 22.928 22. 445Rank 4 3 2 5 6 1
Total Net Income 853 849 849 861 861 843Rank 3 4 5 2 1 6
Utilities
Salaries
Depreciation
Local Taxes
Region / State Scoreboard Analyses
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Real estate – Deal making
Brownfield solutions
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Greenfield solutions
Build to Suit on Industrial Parks
Integrated story: where corporates meet IPA’s
Phase 1
Implementation
Phase 2 Phase 3 Phase 4 Phase 5
Strategic AssessmentLocation Screening,
modeling & benchmarking
Cost comparison Community Evaluations
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• Information & Sales Packs• Investment plans• Policies and incentives• Procedures requirements• Progress and achievements• Create awareness
Image Building
• Advertizing and PR• Information & Marketing• Missions & Events• Company targeting• Company visits• Follow-up
Lead Generation and Targeting • Information provision
• Assistance with contacts• One-stop-shop services• Assessment of manpower,,
Infrastructure service needs• Follow-up
Investor Servicing
• Continued “account executive attention”
• “Ombudsman” role and trouble-shooting function
• Follow-up on manpower, infrastructure, service needs
Aftercare and Policy Advocacy
The most frequently evaluated
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The most frequently evaluated
communities in the U.S. for FDI are…
Most frequent considered communities for FDI
European / Asian companies tend to initially focus first on those metropolitan areas where they can find the following multipliers:
• Presence of local accountant and bank branches they already work with
• Similar expat communities - Metropolitan quality of life
• Presence of Universities where young foreign entrepreneurs study
• Flight Connectivity and Geographical proximity (East coast vs. West coast)
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• Flight Connectivity and Geographical proximity (East coast vs. West coast)
• Mental Map – Usual suspects
European companies
New York
Chicago
Boston
Atlanta
San Francisco
Asian companies
Los Angeles
San Francisco
Chicago
New York
Most frequent considered communities for FDI
• Second tier metropolitan areas located in Central and Mid-
West States are less frequent mentioned
– Kansas City
– Cincinnati
– St. Louis
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– St. Louis
– Memphis
– Minneapolis
• Yet, these cities offer in many different cases an excellent
location proposition with cost and risk levels well balanced
Q + A
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Q + A
The Atlas / ICA FDI
Master Plan.
Work with Atlas and ICA jointly to create your future
FDI master plan. An FDI master plan includes:– A road map for short, medium and long term FDI success for your
community
– Best practices for servicing global business location decision makers
46
– An assessment of current strategy and target markets
– Recommendations for target investor countries/regions, based on your target industry profile
– Benchmarking your community with other communities/countries around the world
– FDI marketing and communications plan
– Tips for partnering with regions or states
Coming to IEDC
in Charlotte?
To reserve your
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To reserve your
place, simply type
“RSVP” into your
chat box.
Contact Information
Contact information:
Gustav Mahlerplein 109 - 111
Contact information:
2601 Blake Street, Suite 301
48
Amsterdam, 1082 MS
Contact: Douglas van den berghe
t: +31 (0)207946081
www.ic-associates.com
Denver, CO 80205
Contact: Ben Wright
t: 303.292.3300 x 210
www.Atlas-Advertising.com
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