How Your Community is (or isn't) Being Evaluated for Foreign Direct Investment


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Atlas Advertising CEO Ben Wright and Investment Consulting Associates' Managing Director Douglas van den Berghe discuss trends and opportunities in Foreign Direct Investment (FDI) in the United States.

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How Your Community is (or isn't) Being Evaluated for Foreign Direct Investment

  1. 1. How Your Community Is (Or Isn't) Being Evaluated for Foreign Direct Investment (FDI)<br />
  2. 2. Your Hosts <br />Ben Wright<br />CEO, Atlas Advertising<br /><br /><br />Douglas van den Berghe<br />Managing Director<br />Investment Consulting Associates <br /><br />Guillermo Mazier<br />Business Development, <br />Atlas Advertising<br /><br /><br />
  3. 3. About Atlas <br />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. <br />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. Our approach and experience means that our campaigns generate an average of three to ten times the response of other campaigns. <br />Featured clients:<br />State of Ohio<br />Nogales, Mexico<br />City of San Francisco<br />Greater Phoenix Economic Council <br />Greater Omaha Economic Development Partnership<br />Webster City, Iowa<br />
  4. 4. About Investment Consulting Associates <br />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.<br />Our business philosophy is to utilize smart and efficient software solutions in providing dedicated and tailored consulting services. and ICAincentives.comare 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.<br />
  5. 5. Download the slides, listen to the video, continue the dialogue <br />Continue the Conversation: <br />Follow us on Twitter:<br />Tweet questions using hashtag #AskAtlas<br />Join Next Gen Economic Development Marketers LinkedIn Group<br />View and share the slides with your colleagues (available now): <br /><br />View and share the video with your colleagues (Will be posted later this week):<br />
  6. 6. Introducing the Atlas / ICA FDI Master Plan.<br /> Work with Atlas and ICA jointly to create your future FDI master plan. An FDI master plan includes:<br />A road map for short, medium and long term FDI success for your community<br />Best practices for servicing global business location decision makers<br />An assessment of current strategy and target markets<br />Recommendations for target investor countries/regions, based on your target industry profile<br />Platform to benchmarking your community with other communities/countries around the world<br />FDI marketing and communications plan<br />Tips for partnering with regions or states<br />
  7. 7. Audience Question:Have you worked on projects that are expansions or relocations of foreign owned companies this year?<br />
  8. 8. Outline<br />Why FDI should be an important part of your strategy today <br />Challenges you face currently in FDI attraction <br />Trends in FDI in the United States <br />How foreign-owned companies evaluate communities today: Current case studies <br />Q+A <br />
  9. 9. Why FDI should be an important part of your strategy today <br />
  10. 10. White House Touts Growing Foreign Direct Investment In The U.S.<br />“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.<br />Labor Availability and Quality Peak in the United States<br />
  11. 11. FDI is growing again, and projected to grow<br />Source: UNCTAD FDI Database <br />
  12. 12. Further the US is the global leader in inflows and outflows<br />
  13. 13. Audience Question: What are your objectives for FDI in the coming year?<br />
  14. 14. Challenges you face <br />
  15. 15. The federal government plays a limited role in FDI promotion <br />
  16. 16. Foreign owned companies know just a handful of US destinations<br /><ul><li>New York
  17. 17. San Francisco
  18. 18. Los Angeles
  19. 19. Dallas
  20. 20. Miami</li></li></ul><li>There can be a significant language barrier for foreign owned companies<br />
  21. 21. Comparing individual cities within countries can be difficult<br />
  22. 22. Audience Question: What tactics have you found to be successful in overcoming these challenges in your community?<br />
  23. 23. Trends in Foreign Direct Investment <br />
  24. 24. Global FDI trends – regional differentiation<br />20 Years ago – shift from Bi-Polar to Tri-Polar according first World Investment Report<br />Currently – shift from Tri-Polar to Emerging Markets (EM)<br />Role of European Union in world outward FDI stock decreased (from 85% in 1990 to 70% currently)<br />Japan no longer qualifies as a Tri-Polar “pole” (at least 10% FDI global outflows)<br />The Share of the top 20 EM’s in Global FDI Stock rose from 6% to approximately 15% between 1990 – 2010<br />The position of the United States will be challenged by the EM’s, but there are also positive signs<br />
  25. 25. Implications for the US<br />US Competitiveness for FDI “Revival of the US Manufacturing Powerhouse”<br />Repatriation and Re-shoring of US companies and business activities <br />Market Seeking: Traditional markets EU still of importance<br />Changing Target Markets – Increased importance of Emerging Markets especially for Greenfield investments<br />
  26. 26. Anecdotal evidence – examples of re-shoring activities in the US<br />Ford Motor Company and Wham-O (the makers of the Frisbee®) are cited as having already brought production back to the U.S.<br />Germany-based Automaker Quaprotek USA invests $22 Million in a new Tennessee facility that brings over 120 jobs to the area.<br />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.<br />NCR plans to begin a second production shift, which will result in a total of 800 new (re-shored) jobs to Columbus, Georgia.<br />
  27. 27. Volatile FDI trend pattern<br />
  28. 28. Growing importance of EM countries for Greenfield investments in the US<br />Source: Organization for International Investment 2011<br />
  29. 29. Top countries by US Greenfield Investment Job Creation – and Industry Sector Analysis<br />Source: Organization for International Investment 2011<br />
  30. 30. Global FDI drivers and trends – a future forecast <br />Resource seeking <br />Market seeking<br />Efficiency seeking<br />Strategic-asset seeking<br />Enhancing synergies (i.e. technology, marketing channels and management expertise<br />Exploiting different factor endowments<br />Supply chain optimization <br />Raw materials,<br />Energy sources<br />following customers,<br />suppliers or competitors abroad<br />CRISIS<br />1994<br />$256 billion<br />2007 record<br />$1,833 billion<br />2013<br />$1,8 billion<br />Relocation/<br />Expansions/<br />Offshore/sourcing<br />
  31. 31. Audience Question: What country or countries are you most aggressively targeting?<br />
  32. 32. How foreign owned companies evaluate locations: A recent case study<br />
  33. 33. 1990 location selection process<br />Site visits<br />Journals<br />Newspapers<br />Brochures<br />Trade Shows<br />SIX MONTHS<br />City<br />City<br />City<br />City<br />City<br />City<br />City<br />City<br />City<br />
  34. 34. 2011 location selection process<br />EIGHT WEEKS<br />85% of initial search = Internet<br />Detailed info<br />Services<br />
  35. 35. Cost comparison<br />Location Screening, <br />modeling &benchmarking<br />Implementation<br />Community Evaluations<br />Strategic Assessment<br />Phase 1<br />Phase 2<br />Phase 3<br />Phase 4<br />Phase 5<br />Client<br /><ul><li>Input cost model
  36. 36. Define real estate objectives and accommodation needs
  37. 37. Resources for site visits
  38. 38. Define project and goals
  39. 39. Business requirements
  40. 40. Project assumptions</li></ul>Project definition & understanding of strategy<br />Analysis and comparison <br />of locations<br />Comparison of costs<br />Real estate support<br />Site visits<br /><ul><li>Data gathering
  41. 41. Build model for location analysis
  42. 42. Present rankings of locations
  43. 43. Sensitivity analysis
  44. 44. Exploration of incentives</li></ul>Consultant<br /><ul><li>Prepare site visits
  45. 45. Prepare discussions with relevant governments and service providers
  46. 46. Incentive negotiations
  47. 47. Determine geographic scope
  48. 48. Selection of location factors
  49. 49. Weighting location criteria
  50. 50. Set up cost model
  51. 51. Cost differentials between locations
  52. 52. Real estate transaction and acquisition support</li></ul>Corporate investment routemap<br />A New Generation in FDI Advisory<br />
  53. 53. Phase 1<br />Project details – Case Study company ABC<br />Company “Bulk and Specialty” has taken over parts of company Y operation in US State I.<br />Operations and machinery may have to be relocated (factory and warehouse).<br />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: <br /><ul><li>Land €3,000.000
  54. 54. Building €6,500.000
  55. 55. Machinery & equipment to be moved from an existing site €3.500.000
  56. 56. New machinery & equipment €2.500.000
  57. 57. Employees 50-75 (fte) with 2-3 shifts</li></ul>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<br />
  58. 58. Case study: company ABC<br />Phase 1<br />Business drivers and challenges – Chemical Industry<br />High impact of energy of and feedstock costs<br />Limited growth potential in current US State I due to saturated markets and demographic impacts<br />Migration of more and more customer-industries to low-cost countries<br />Growing commoditization <br />New competitors from Asia and Middle East: pressure on margins<br />Increasing regulations<br />
  59. 59. Scenario approach<br />Phase 1<br />Base case scenario: stay in US State I<br />Supply chain effective scenario: Relocate to Mid-West <br />Illinois – Missouri – Iowa - Ohio<br />3. Labor cost effective scenario: Relocate to Mexico<br /> Mexico<br />Overseas offshore scenario<br />China<br />A New Generation in FDI Advisory<br />
  61. 61. Benchmarking techniques –<br />
  62. 62. Financial due diligence<br />Phase 3<br />Logistics<br />Duties<br />Tariffs<br />Utilities<br />Salaries<br />Depreciation<br />Local Taxes<br />
  63. 63. Region / State Scoreboard Analyses<br />
  64. 64. Realestate – Deal making<br />Brownfield solutions<br />Greenfield solutions<br />Build to Suit on Industrial Parks<br />
  65. 65. Integrated story: where corporates meet IPA’s<br />Aftercare and PolicyAdvocacy<br />Lead Generation and Targeting<br />Cost comparison<br />Location Screening, <br />modeling & benchmarking<br />Implementation<br />Community Evaluations<br /><ul><li>Information & Sales Packs
  66. 66. Investment plans
  67. 67. Policies and incentives
  68. 68. Procedures requirements
  69. 69. Progress and achievements
  70. 70. Create awareness
  71. 71. Information provision
  72. 72. Assistance with contacts
  73. 73. One-stop-shop services
  74. 74. Assessment of manpower,,Infrastructure service needs
  75. 75. Follow-up</li></ul>Strategic Assessment<br /><ul><li>Advertizing and PR
  76. 76. Information & Marketing
  77. 77. Missions & Events
  78. 78. Company targeting
  79. 79. Company visits
  80. 80. Follow-up
  81. 81. Continued “account executive attention”
  82. 82. “Ombudsman” role and trouble-shooting function
  83. 83. Follow-up on manpower, infrastructure, service needs</li></ul>Phase 1<br />Phase 2<br />Phase 3<br />Phase 4<br />Phase 5<br />Image Building<br />Investor Servicing <br />
  84. 84. The most frequently evaluated communities in the U.S. for FDI are…<br />
  85. 85. Most frequent considered communities for FDI <br />European / Asian companies tend to initially focus first on those metropolitan areas where they can find the following multipliers:<br />Presence of local accountant and bank branches they already work with<br />Similar expat communities - Metropolitan quality of life<br />Presence of Universities where young foreign entrepreneurs study<br />Flight Connectivity and Geographical proximity (East coast vs. West coast)<br />Mental Map – Usual suspects<br />European companies<br />New York<br />Chicago<br />Boston<br />Atlanta<br />San Francisco<br />Asian companies<br />Los Angeles<br />San Francisco<br />Chicago<br />New York<br />
  86. 86. Most frequent considered communities for FDI <br />Second tier metropolitan areas located in Central and Mid-West States are less frequent mentioned<br />Kansas City<br />Cincinnati<br />St. Louis<br />Memphis<br />Minneapolis<br />Yet, these cities offer in many different cases an excellent location proposition with cost and risk levels well balanced<br />
  87. 87. Q + A<br />
  88. 88. The Atlas / ICA FDI Master Plan.<br /> Work with Atlas and ICA jointly to create your future FDI master plan. An FDI master plan includes:<br />A road map for short, medium and long term FDI success for your community<br />Best practices for servicing global business location decision makers<br />An assessment of current strategy and target markets<br />Recommendations for target investor countries/regions, based on your target industry profile<br />Benchmarking your community with other communities/countries around the world<br />FDI marketing and communications plan<br />Tips for partnering with regions or states<br />
  89. 89. Coming to IEDC in Charlotte? <br />To reserve your place, simply type “RSVP” into your chat box. <br />
  90. 90. Contact Information <br />Contact information:<br />Gustav Mahlerplein 109 - 111<br />Amsterdam, 1082 MS<br />Contact: Douglas van den berghe<br />t: +31 (0)207946081<br /><br /><br />Contact information:<br />2601 Blake Street, Suite 301<br />Denver, CO 80205<br />Contact: Ben Wright<br />t: 303.292.3300 x 210<br /><br /><br />LinkedIn Profile| LinkedIn Group | Twitter| Blog| Slidespace<br />