targeting sectors and markets

7/28/2019 Targeting Sectors and Markets

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SESSION 9:TARGETING OF SECTORS AND

MARKETS

Mr. Sean M Duggan Director, ILSA Consulting

25 June 2012



Overview of session 9

1. About targeting

2. Choosing targets – Targeting case example

3. Lessons and discussion issues

2



1. About targeting

What is targeting?

DriversIncreasing competition among locations to

attract and benefits from FDI

PurposeGenerate high quality investment leads and

investment prospects

PrinciplesBased on private sector practices and

contemporary marketing techniques

ApproachWell researched and planned approaches to

investment decision makers (and advisers)

DeliveryConsistent concentration on targets (sectors,

functions, companies and source markets)

OutcomesGreater benefits from investors and investment

in the longer term

3



1. About targeting

Evidence suggests targeting works!

4

Econometric evidence

• Targeted sectors receive more

than twice as much FDI as non-

targeted sectors in developing

countries (Harding andJavorcik, 2010)

• Targeting industries for

investment promotion leads to

an increase in FDI of 60%

(Charlton and Davis, 2006)

Location experiences

• Considered a key part of

Ireland’s success in attracting

FDI during the 1980 and 1990s

(MacSharry and White, 2000)• Restructuring Tunisia’s FIPA

from country to industry

targeting a key to success

(Mansour, 2005)

• Contributed to InvestHK's high

level of delivery and cost-

effectiveness (PwC, 2009)



1. About targeting

Targeting advantages

•Focuses effort on the best FDI prospects

• Increases investors’ (and intermediaries’)

awareness of location, its offer and the IPA

• Investors react more positively to tailoring of

information and services

•Supports locations in the identification,

promotion and development of offer

5



1. About targeting

Which targets?

Sectors/sub-sectorsISIC Sections = 21ISIC Divisions = 234

ISIC Classes = 413

Functions

HQ/RHQ, capital allocation

Research and development

Product design/developmentProduction and fabrication

Branding, marketing and sales

Storage, distribution and logistics

After sales service and support

Business enterprises82,000 TNCs (2008)

Different sizes

6

Business clustersLinks between sectors/sub-sectors,

functions and business enterprises

Source markets =

232

Top 20 markets =

86% of FDI



1. About targeting

7

Illustrations of sector targets?

10Czech Republic

(Czech Invest)Nanotechnology, Automotive, Aerospace,

Cleantech, Electrical engineering

Location (IPA) Targets Selected sectors/sub-sectors

11Ireland (IDA)Business services, Consumer products

Cleantech, ICT, Life sciences, Media

9Hong Kong

(InvestHK)Business services, Creative industries,

Professional services, ICT, Transport

20Singapore (SEDB)Aerospace, Chemicals, Healthcare, Marine

engineering, Precision engineering, ICT

9Jordan (JIB)Agro-Industries, Automotive, Chemicals,

Mining and processing, Pharmaceuticals

6Tunisia (FIPA)ICT, Electric and electronic, Mechanical,

Textiles, Food industry, Leather and shoes




Pressure for change (1990s) – erosion of FDI

8

Location FDI

programme

New location economicdevelopment policy

priorities

Shifting patterns in FDI

– move to services

Relative decline in offer

competitiveness

Negative perceptions

of the location offer Rising investor

sophistication and

expectations

Increasing importance

of reinvestment Negative perceptionsof the existing FDI

programme

Agency divergence

from good practices



Location supply

• offer

Location demand

• requirements

Location

market


A new approach (1999/2000)

9

Targets

• sector/function

• source

Offer improvement

• awareness

• advocacy

Investor response

• awareness

• satisfaction

OpportunitiesRisks

(Net) profitability

InstitutionsSupporting infrastructure

Regulatory environment

AwarenessAttractiveness

Competitiveness

Business strategy

Investment drivers

Policy priorities

Development needs

Strategy Governance and organisation

Performance monitoringResources

Marketing and promotion

Investment

generationImage building

Investor

servicing

Aftercare and

Advocacy




Identification of targets

10

• Assessment of:• Business internationalisation trends

• Investor location requirements

(criteria and weighting) – overall and

sector

• Patterns of location decisions –

levels of mobility

• Investor (and broker) perceptions

• Stakeholder testing and opinion

• Assessment of:• Successful locations – features and

lessons

• Location competitors – targets,

positioning, value propositions

• Relative competitiveness as a

location – overall and sectors

• Location brand profile

• Stakeholder testing and opinion

Sector targets

Location supply

• offer

Location demand

• requirements

Location

market

Business strategy

Investment drivers

Policy priorities

Development needs




Sector focused organisation structure

11

Assistant Head

Sector Lead

Agency Head

Assistant Head

Sector Lead

Assistant Head

Special Projects

Investor Support Team

Sectors


Sectors


Special Projects

Investor Support Analysts

Sectors


Sectors


Special Projects

Marketing and

Communications

Corporate Services and

Administration

Overseas

Offices / Representatives

Strategy

Investor Support

Research

Corporate Services

Key




Supporting investment database

12

Market knowledge Investment project Offer proposition

• Sector description

• Main sector trends,

drivers and features

•

Market/industry issuesimpacting investors

• Major investing

business enterprises

decision makers in the

sector

• Level of expected

international mobility

of investment

• ‘Typical’ investment

project

process/requirements

•

Quantifiable aspects of a ‘typical’ investment

• Criteria influencing an

investors’ location

decision

• Criteria to assess

priority given to

potential investment

projects• Identification of the

most likely regional

rivals

• Location ‘offer’ position

of rivals

• Core proposition

arguments for location




‘Virtual’ organisation – networks and partners

13

Investment Promotion Agency

Industry Department

Networks

FDI Steering Group

Overseas Trade

Offices

Trade Development

Agency

Economic

Development OfficesAmbassadors

Head Office

Overseas Representatives

Overseas Offices

Reflecting target

source markets

Brokers, investor

bodies, media,

Government

Government and

Private sector

Independent and

influential individuals




Progressive rollout

14

Investor identification Investor approach

• Target enterprises (by

sector and source

market)

•

Initial long-list of enterprises

• Short-list based on

response

• Develop detailed profile

information – capture

on customer

relationship database

• General promotion

information

• Initial e-mail/phone

contact• Develop tailored

propositions

• Follow up presentations

and meetings

• Long term relationship

building strategy –

visits, events,

introductions

Investment assessment

• Criteria based to

determine level of

support and type of

handling response• Sector

• Additionality

• Displacement

• Net benefit

12-36 months




Performance targets (illustrative)

15

Process step Target description Target metric

Input context • Staff

• Expenditure

• Number (X)

• Budget ($)

Products, services and

activities

• Projects

• Leads

• > X

• > X

Investor • Perceptions

• Satisfaction

• > X% very positive

• > X% very satisfied

Outcome • Investment

• Jobs

• > X

• > X

• Performance targets clear and transparent and are aligned to strategy

• Emphasis is placed on targeting investors and outcomes

• Performance is reported publicly on a yearly basis




Targeting refinement (2007/8)

16

Desirable Sector targets Attractable

• Based on performance characteristicsof sectors using seven measures:

• Wage level

• Employment per enterprise

• Value-added per employee

• Capital invested per enterprise

• Industry size

• Industry growth

• Technology

• Based on relative sector strengths(revealed comparative advantage

analysis – industry performance

relative to OECD industry averages):

• Industry size

• Export size• Labor productivity

• Export specialisation

• Value-added

Location supply

• offer

Location demand

• requirements

Location

market

Business strategy

Investment drivers

Policy priorities

Development needs




Revised sector targets (illustrative)

17

‘Future goal’ ‘Core’

‘Bad fit’ ‘Quick win’

Motor vehicle sales and repair

Glass and ceramics

Wholesale trade

Construction services

Transport services

Retail tradeFood processing

Biotechnology

Aircraft manufacturing

Research & development

Publishing

Hotels, hospitality & tourism

Transport and logistics

Business support services

Furniture manufacturing

Ship building

Energy extraction

Telecommunications

Paper products

Rubber & plastics

Iron & steel

Financial services/BankingInformation technology

Pharmaceuticals

Supporting services

to air transport

Finance/Investment cos.

Education services

Harder EasierAttractability

Lower

Higher

D e s i r a b i l i t y

Priority

sectors

Longer-term

sectors

Key clusters

Key clusters

Key clusters

h l




Revised source markets (illustrative)

18

Consistency

Low

High

Priority

marketsPortfolio of

secondary markets

h i i i h



2. Choosing targets – OECD quantitative approach

19

Variable Measure

Value-added

Share of value added of the sector

in total value added

Compound Average Growth Rate

(CAGR) of value added of the sector

over 5 years

Exports

Share of the sector in total exports

Evolution of the RelativeComparative Advantage of the

sector over 5 years

Cost of Labour

Labour cost advantage or

disadvantage in the sector

(benchmark: a cluster of emerging

countries)

World FDIs trends

Share of world FDIs inflows of thesector

CAGR of world FDIs inflows over a

number of years

FDI stocks in

CAGR of FDI stocks of each sector as

a percentage of GDP over a number

of years

Sector Attractiveness index

Variable Measure

Employment

Share of the sector in total employment

CAGR of employment of the sector over

a number of years

InnovationSector Innovation Performance Index

built on 12 OECD countries

Level of

complexity

Value added created per employee of

the sector

Country benefits index

2 Ch i OECD i i h




Country benefits Index

Agri

Fishing

Mining

Food

Textiles Leather

Wood

Paper Publishing

Coke, refined petroleum

products and nuclear fuel

Chemicals

Rubber and plastics

products (beneath real

estate)

Other non-metallic mineral

products

Metals

Machinery and equipment

Transport equipment

Electrical and optical

equipment

Electricity, gas and water

supply

Construction

Trade

Hotels and restaurants

Transport

Communication

Real estate, renting

Business services

0

5

10

15

20

25

30

35

40

45

50

0 10 20 30 40 50 60

Mean = 25

Mean = 27

70

70

Financial activities

The size of the bubble reflects the relative

share of FDI stocks

Ukraine, 2010

Sector attractiveness Index

2 Ch i OECD i i h




Median = 34

Agriculture, hunting

and forestry

Fishing,Leather and leather products

Papers

Coke, petroleum products , nuclearfuels manufacturing

Chemicals

Non-metallic mineral products

Basic metals and fabricated metal

products

Machinery

Motor vehicles &

transport equipment

Electricity, gas & water supply

Construction

Hotels & restaurants

Transport &

storage

Real estate

12

16

20

24

28

32

36

40

44

48

52

56

60

64

68

72

76

4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72

Communication

Trade & repairs

Rubber &

Plastic products

Finance

Food, beverages

& tobaccos

Electrical &

electronic equipment

Textile and textile products

Business & IT services

Geological services

Finance

Mining & quarrying

Country benefits IndexKazakhstan, 2009

Sector attractiveness Index

The size of the bubble reflects the relative

share of FDI stocks

2 Ch i t t OECD tit ti h




22

U k r a i n e ,

2 0 1 0

K a

z a k h s t a n ,

2 0 0 9

Quantitative

analysis of past

trends

Consultations and

Research

Stakeholders’

validation

•Oil/gas related sectors

and financial services

show high past

performance

•However, Kazakhstan

has capabilities and

endowments that could

be leveraged in

agribusiness, chemicals,

logistics or businessservices

•The government priority

is to diversify the

country and focus on

tradable and higher

value-added products

•The OECD suggests

focusing on specific sub-sectors

•Financial services and

metals show high past

performance

•However, Ukraine was

impacted by the

financial crisis and the

external shock on

demand for metals•Ukraine has capabilities

and endowments that

could be leveraged in

other sectors such as

agribusiness, aircraft

manufacturing,

renewables

•Priorities of the

government include

diversification frommetals, reducing

dependency on

imported natural gas,

improving value-added

productions

•The OECD suggests on

focusing on specific sub-

sectors

Agribusiness – beef,

grain and dairy value-

chains

Chemicals – fertilizers

Logistics – focusing on

agribusiness

Business Services

Agribusiness – grain

and dairy value-chains

Renewables – biomassvalue-chain

Machinery and

transport equipment –

civilian aircraft

manufacturing

Agreed targets

2 Ch i t t T ti l




What not to do

23

Location supply

• offer

Location demand

• requirements

Location

market

Targets

• sector/function

• source

Offer improvement

• awareness

• advocacy

Investor response

• awareness

• satisfaction

OpportunitiesRisks

(Net) profitability

InstitutionsSupporting infrastructure

Regulatory environment

AwarenessAttractiveness

Competitiveness

Business strategy

Investment drivers

Policy priorities

Development needs

Strategy Governance and organisation

Performance monitoringResources

Marketing and promotion

Investment

generationImage building

Investor

servicing

Aftercare and

Advocacy

No National

investment policy

statement

Overall programme

lacks coherence

Poordirection/support

provided

Lack of targets,

measurement and

reporting

Information is not

available or

difficult to access

Weak dialogue and

feedback12 sector targets

not evidence base

Inadequate

resources and

annual budget cycle

Little evidence of

advocacy and offer

improvement

Lack of strategy

implementation

3 L d di i i




Targeting is about more than targets

24

• Alignment of locationsupply and demand

• Focusing on appropriate

prospects

•

Promoting the location(and agency) to influence

behaviour:• Generate positive investor

responses

• Stimulate locationimprovements

• Coherence and consistency

of approach

Targets

• sector/function

• enterprise

• source

Promotion

programme

Offer improvement

• awareness

• advocacy

Location supply

• offer

Location demand

• requirements

Location

market

Investor response

• awareness

• satisfaction

3 L d di i i




Key lessons from experience of targeting

25

Build on research andunderstanding

Targeting should use criteria built on marketknowledge – location demand and supply

Part of a coherent

programme

Combine as part of a wider programme

approach – with new and existing investors

Tailor to target needs Preparation and use of proposition based salesand promotional materials for use with targets

Include networksUses a wide range of partners including

government brokers and ambassadors

Sustained and persistentapplication

Long time engagement with networks to makeand sustain relationships – a “trusted adviser”

Apply learning principlesMonitoring to update market knowledge,

assess outcomes and enhance the offer

3 Lessons and discussion issues




26

Key lessons from experience of targeting

But ... It doesn‘t guarantee success

Objectives

Research / DataPerformance

monitoring

Analysis

Programmedesign

Delivery

Tools /materials

Policy prioritiesDevelopment needs

Its an on-going process – the world changes

3 Lessons and discussion issues




Some key discussion questions

27

ResearchWhat level of research have you undertaken to

understand the location market and sectors?

ProgrammeTo what extent do you have all of the

programme components in place?

ResourcesWhat information do you have available and towhat extent is it tailored to targets?

NetworksWhat networks are in place and how well are

they being used in practice?

ApplicationHow long has the targeting approach beenoperating?

LearningHow often is performance assessed and what

offer enhancements have been made?

targeting sectors and markets

Documents