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Getting "on the Short List" - after the initial
"Long List"
Tough competition and choices for
"foreign" or local corporate direct investment projects
A review of the strategic corporate "site selection"
decision process and
location strategy consulting work
by Bruce
Donnelly, Global Direct Investment Solutions -
Biographic Profile
Download or print
: Adobe Acrobat .pdf copy of
this 5 page article TEL : 847-304-4655 e-mail:
bruce@gdi-solutions.com
See also :
new book for
2006 by a veteran global site selection consultant based in Europe,
Marcel de Meirleir
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In the economic development profession and among site
selection or business location strategy consultants, getting "on the short
list" is a widely accepted goal of investment promotion agency programs
designed to attract new industries, companies, and jobs to a community,
whether at the local, county, city, state, provincial, regional or national
level.
Although this common expression has other meanings in
other contexts, the widespread usage in economic development reflects the
typical business site selection process for projects as companies expand,
relocate, or consolidate operations. Communities compete to develop
successful business clusters according to the advantages which their areas
can offer.
Their "investment attraction" promotional work to get "on
the short list" complements important local "business retention and
expansion" work to support the further development of companies which are
already established in the community. To get "on the short list" for
major projects, business locations first need to get on the "long list" of
places which the key executives and their advisors regard as potentially
suitable for their critical business location requirements. This often
involves "location brand" marketing campaigns to try to attract the
attention and arouse the interest of that small target audience, and to
communicate what differentiates the location in meaningful, valuable, and
memorable ways for potential investors.
Companies may choose to redeploy their operations as their
growth strategies and competitive markets or internal processes and
operational needs change, but this is not necessarily a negative reflection
on the community they may choose to leave.
Homeowners
may move to a new location which better suits their current needs, without
meaning that the community or building they left behind has failed or is
unsuitable for others. It is the nature of capitalism
to be dynamic, competitive, and innovative, constantly seeking new market
opportunities and redeploying capital to where it can be profitably applied.
Past location choices may not be indicative of what is needed to
produce future results.
Strategic capital investment project decisions therefore involve
far more than just the selection of specific "sites" such as greenfield or
"brownfield" industrial sites, industrial buildings, warehouses,
distribution centers, industrial or business parks, office buildings,
science and technology research parks or other types of commercial or
corporate real estate.
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The strategic importance and high value of business
location selection and workspace design
To be blunt, few companies succeed or
fail because of the land or building they occupy, with the possible
exception of retailers and the hospitality sector (restaurants, hotels) or
some other types of service providers, and even those can readily fail in a
good location according to what happens inside the business, regardless of
the quality of the location outside the walls.
In short, Enron was not Houston's fault (nor Arthur
Andersen's, for that matter). Failure is easily self-inflicted by
definition according to the expected quality and delivery of value through
products and services. Even the most optimal business location choice
will not save a company from making other bad choices, or simply failing in
a very competitive marketplace. Companies succeed and fail. So
do communities. Together, however, good companies in good business
environments can do remarkable things by serving specific markets very well,
and thereby deliver benefits far beyond their own local community,
employees, and shareholders.
Companies occupy real estate for office work, production,
distribution, or other functions, but real estate doesn't really drive the
location decision. Homeowners occupy houses and renters live in
apartments, but they choose the region where they want to live for other
reasons, such as strategic choices about their lives, careers, and family or
personal interests, even though their eventual choice of a specific property
to buy or rent may reflect what is available at the time and what they can
afford. As immigration patterns prove, people vote with their feet to
some extent, despite the many obstacles and disruptive or even traumatic
nature of relocation. This has been true since the dawn of
civilization - it's not a recent phenomenon.
The same is true of corporate relocation decisions.
It is not corporate treason to move somewhere else when it becomes necessary
or when the leaders simply choose, rightly or wrongly from any objective
point of view, to do so. Relocation of operations is just one of many
options as a competitive market changes. There are many ways to
compete - not just on cost. Just as individuals make both good and bad
location choices in their lives, and don't all migrate to the cheapest
places on Earth, company executives do the same thing.
They can also make mistakes regardless of good intentions
and clever strategies. Many personal choices are made in the design
choices for buildings and the workspace environment "inside the walls", just
as all homes are not the same as one objectively optimal design for
everyone. It is the nature of civilization and capitalism to embrace
diversity in such choices about the environment in which one lives and
works, with many niche markets for different needs and expectations, and no
objectively right or wrong answer about what works well. Business
location decisions and workspace design are both objective and subjective
choices about the future direction of a company, just as free individuals
can choose the future direction of their own lives, including where and how
they live.
The place and the space or environment where employees do
their work for a company is important, because good or bad location and
design has long-term consequences for employee availability, motivation,
performance and efficiency (like a well-designed factory or office or
distribution center layout as obvious examples), but a good workspace
environment can be created anywhere. Businesses can operate
successfully in some of the most challenging political-economic and physical
environments on the planet if there is a good business reason to do so.
Oil companies, for example, operate in some truly dreadful and remote places
because of the high value created by doing so, even though they might prefer
to find everything they need in much easier places to do business. The
company can influence what happens inside the walls to make the workplace
attractive, but it can't readily change the external business climate of a
location despite some potential to help improve the local community
environment. Instead, the business environment needs to be carefully
chosen. This choice delivers high value because it affects the
available workforce, logistics, supplier base, proximity to customers, tax
costs, regulatory environment, political risks and many other selection
factors.
In short, when picking a new business location, the
company needs to consider all of the issues which would contribute to the
success or failure of an investment project, both outside and inside the
walls, and the expected value of that investment relative to other potential
investment alternatives. A property transaction is
the eventual outcome of the location decision process and negotiations, and the
availability of a suitable property may influence the eventual
choice, but the fundamental issue is to find a good place to perform
specific business functions as part of the global corporate strategy, rather
than just to find an available piece of real estate on which to do a
particular task.
Business location selection affects capital investment requirements,
operating costs, the availability of talented employees, and cash flows far into the future. Apparently
similar locations can yield very different results. |
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Project definition : Location requirements and the
relative importance of key selection factors At
the early stages of capital investment project planning, such as for a new
factory, office, warehouse, R&D center, or other type of business
operations, executives and their advisors try to define what the business
needs to find in a new business location, such as critical project
requirements or site selection factors, and what would differentiate one
area as preferable to another. The same is true in relocation or
consolidation decisions such as M&A planning and post-merger integration
work. The same basic decision process to focus the location selection
market research and analysis work applies to both "domestic" projects and
foreign direct investment (FDI) projects. Whether one is screening out
many places by general data attributes or searching for relevant places with
the desired characteristics, the scope of the search needs to be focused.
Indeed, "foreign" direct investment implies a local point
of view, since investment in any other city, county, or state would seem
"foreign" from the headquarters location perspective. Most companies
are not nationalized, nor is the scope of their business confined to
national or local political boundaries. They are free to invest in
growth wherever the executives may choose. Whether they choose to
expand at an existing location or invest in new locations across local
political borders or national ones, the decision process from a corporate
perspective is largely the same.
The outcome from a local or national government
perspective, such as job creation or statistics about FDI flows, is usually
not a major factor in business location decisions unless the project is
clearly tied to government services or programs in some way. The fact
that many areas compete very actively to attract such projects does not
alter the fact that executives will invest wherever they think their
business is most likely to succeed. Their success (at least in the US)
is not generally driven by negotiating deals with government officials.
Instead, they will want to negotiate the best deals they can for any
negotiable benefits which can help their project, but location choices will
usually be driven by fundamental business considerations. After all,
governments and their policies about business attraction and retention
change. The company needs to reliably succeed in spite of political
risks or changes. |
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Research and analysis to select and screen an initial
"long list" of candidate locations After the
"needs definition" phase, the search process moves into the "long list"
phase of high-level research and screening of many potential locations to
assess their relevance to the project requirements on the most fundamental
selection factors. In other words, if these basic location criteria
are not met, the location is considered to not be worth investigating
further. This may start at the national level (which country?) or be
confined to specific regions, perhaps because of supply chain and logistics
considerations, raw materials, or client expectations, as in the case of
just-in-time component suppliers in the auto industry. In any case,
there may be a relatively long list of potentially viable business location
alternatives. |
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Companies and their advisors follow different decision
processes to select their "long list" choices, but regardless of the factors
which they are evaluating or how they are approaching the site selection
decision for an investment project, they will usually recognize at an early
stage that they do not have the time, inclination, or resources to research
and evaluate all of the places which could potentially be relevant to their
interests. Instead, they need to focus their attention and work on a
few places which seem to be the most relevant choices, whether for objective
reasons driven by factual analysis and quantitative methods or by subjective
judgment on the basis of personal experience, preferences, or feedback from
others. |
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Quick focus "on the short list" of apparently most
attractive alternatives The "long list" is soon
cut down, sometimes through very superficial analysis or even personal bias
and in ways which may seem suboptimal, arbitrary or unfair, especially to
competing areas which are quickly excluded from more detailed research and
consideration. The relatively few places that wind up "on the short
list", for whatever reason, are the ones that the executives and advisors
choose to research in greater detail because they are more confident that
one of these places will prove to be a good choice.
That doesn't mean that all of the places "on the short
list" are the optimal alternatives through analysis in any perfectly
objective way. It just means that the executives and their advisors
believe that one of these places will be good enough for their purposes.
Once again, they don't have unlimited time and resources to investigate all
potential alternatives in detail. Typically, they need to choose
someplace pretty quickly that will be suitable, and get on with the project.
If it is worth doing because it will be a profitable investment, then it is
generally worth doing sooner rather than later. Project delays can
raise costs, miss market opportunities, provide an opportunity to
competitors, and be harmful in other ways. Once the basic decision is
taken that the company needs to expand somewhere, the location selection
process should quickly focus on a few apparently viable alternatives. |
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Subjective analysis - no objectively "right" location
choice or decision process It's important to
recognize that there isn't an objectively "right" or "wrong" way to pick a
business location. It is fundamentally a subjective judgment, usually
supported by some degree of factual analysis, by top executives about what
is in the best interest of their company. In the case of some
privately held companies, the decision process can be quite simple and
rapid. In effect, "I know my business, I know what I want to find,
it's my money at risk in this choice, and this looks like a good choice to
me". Even if the choice may seem arbitrary or suboptimal to an
independent observer, as in the case of projects which literally go to a
place where the key executive wants to live or play golf, the point is that
privately held or small companies may often make faster decisions on the
basis of a very simple "short list" of preferred locations and more personal
knowledge of these areas. |
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By contrast, business location selection at publicly traded
or larger corporations is typically a more methodical and slower process.
Not always, but usually. These executives are investing somebody
else's money and are accountable to their board and shareholders (include
personal legal risk considerations) for the consequences of the investment
decisions they take. Even if personal preferences may be a factor in
their long list and short list preferences or the final location selection,
the executives will at least want to be able to demonstrate a credible case
that they were making a very justifiable choice. Despite personal
preferences, they will typically be more willing to seriously consider other
alternatives. Serious location consultants will not generally want to
jeopardize their own professional reputations and potential legal liability
by entering into site selection work which is clearly a game of marked
cards, in which they are simply being hired to rationalize the preferred
choice of key executives without careful consideration of potentially better
alternatives. |
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Getting a community "on the short list" may be a critical
goal for EDO's, but it's just the start It is the basic objective of most economic development
organizations (EDO's) to get "on the short list" for any projects which
might reasonably be expected to succeed in their areas. Whether that
is the optimal choice for the company or not isn't really their concern.
They want the jobs, investment, and growth potential to come to their
community. They don't want to just get "on the short list". They
generally want to close the deal to win the project as fast as possible. |
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From a corporate executive and location consultant
perspective, however, the "short list" is simply a necessary step in the
selection process to focus the research and analysis work. Consultants
may feel more confident about recommending a location for the
"short list" if they have actually done work recently in that area
for other clients, or have visited recently. Realistically, there are
so many potential business locations and so few consultants that they cannot
possibly have timely knowledge of everyplace. That's why the more
exploratory initial research to identify the "long list" alternatives is
important so that potentially good solutions are not simply overlooked,
particularly because each project has different needs. What may have
been unsuitable for one client may be a great fit for another.
Communities are not a commodity, and they are dynamic. They change.
It is therefore a constant challenge to develop and maintain adequate market
knowledge across many locations to consistently identify very good location
choices for clients. Business advisors who rarely confront such issues
in their work for clients will have even less market knowledge to guide
their recommendations, and may not be as expert at recognizing all of the
critical issues for a project, or how to compare the alternatives.
After all, there is rarely an obvious "right answer", and subtle differences
can prove to be critical or very costly. |
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No visit, no project : with many millions of dollars at
stake, community visits are a critical step
Regardless of the site selection decision process or who performs the work
involved - whether it is done in-house, with a top location consultant, or
with some other advisor - the bottom line is that executives at private or
publicly traded companies will rarely invest in a location until they visit
to check it out carefully. They have a "due diligence" obligation for
major investment decisions, and their professional advisors have their
company and personal reputations and liability risks at stake. They
will probably visit a favored location repeatedly and review it very
carefully before making a final choice. It all depends, however, on
whether the community made the cut to get "on the short list" for closer
consideration.
The purpose of the Professional Site Selection Tour is
therefore to help communities to attract the attention of relevant
professional advisors and their clients, according to the type of business
which the community is trying to attract and retain. At the same time,
the Tour helps such advisors to develop and maintain better and more timely
knowledge of potentially good business location alternatives for their
clients. They can also provide useful feedback about the viability in
practice of the targeted marketing strategy of the community, including
informal suggestions about how to improve and the perception of their
competitive strengths and weaknesses. This isn't in-depth research and
analysis. It's more of a quick reality check, such as the work they
would do to validate that an initial short list is appropriate and to focus
the more detailed research and analysis work on likely preferences. |
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The competition for a major project really heats up after
getting "on the short list" Nobody can assure
that a community will get "on the short list" for all projects which are
potentially relevant to the area's investment promotion strategy, but this
advance research work should at least help to get fair "long list"
consideration by making it easier to recognize when the area is potentially
relevant. It also make it easier to quickly evaluate whether the area
merits inclusion in the "shortest list" as a finalist. Given recent
personal experience through a well-organized visit program, the consultant
can speak more confidently to a client about the potential pros and cons of
a location which the client may not otherwise have considered seriously.
This can be particularly important if there are negative stereotypes about
the area, or if recent developments have significantly changed the business
environment in a way which the consultants or their clients may not yet
recognize..
After the short list definition stage in the selection
process, however, it all boils down to how the competing locations stack up
against each other in the more detailed market research and analysis
for the needs of a specific project. The Tour is intended to help
areas as they compete for general consideration as "short list" candidates
for target industries or projects, but it remains a very competitive
process. After all, if a company narrows all of their alternatives
down to 5 "short list" locations, that still means that 80% (4 out of 5) of
the communities will be unhappy about the eventual outcome of the process.
Attracting a consultant visit does not assure that the area will win the
projects of their clients. It just improves the probability that the
area will be carefully and fairly evaluated as a potential short list
alternative when it is relevant to the needs of a client. |
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How Global Direct Investment Solutions helps executives,
professional services, and business communities
Our role is to help support business location choices, delivering value by
sharing practical market knowledge and networking contacts through working
relationships and contact with :
- Top executives facing strategic choices about
where they do business (where to establish, expand, move or restructure
their operations or alliance as markets and plans change.
- Professionals representing areas which are
motivated to attract and retain companies. Refer to the
Area Search feature,
our various directories, and the Area Surveys, Profiles, and
Reports
such as those developed through the Professional Site Selection Tour or
other research work
for examples of many economical ways in which we can share
knowledge about communities to help recognize when they may be relevant to
the needs of a particular investment project as executives and their
advisors search for new business locations.
- Professional service providers for projects in
North America, Europe, Asia or worldwide. Refer to the
global Contacts
directories for examples, or the selective Professional Search tool
and Professionals or Biography directories at OnTheShortList.com for
examples of how we can highlight professional capabilities and introduce
relevant contacts.
The OnTheShortList.com website is intended to serve as a
research tool for executives and their business advisors as they confront
business location research needs in general, and site selection and service
provider choices for capital investment projects in particular. It
selectively shares knowledge, market research work, and contacts as an open
resource supported by independent professional research and referral work.
The GDI-Solutions.com website serves as a more
comprehensive resource, but all of the content is readily accessible through
the more selective OnTheShortList.com website, such as through the various
Search tools and highlighted directories which have been designed to make it
very fast and easy to find relevant resources in this niche market as they
are needed.
The work of Global Direct Investment Solutions is the
market research, relationship development, marketing and independent
referral work to bring these three groups together as a more efficient
global marketplace and executive decision support tool in support of the
flow of billions of dollars in capital investment projects each year.
Thousands of corporate investment projects each year affect communities
worldwide, and the millions of people who work at those companies or live in
those communities. Such investment choices obviously have a major
impact on the companies, present and potential employees, and communities
involved.
Like a global concierge service, we organize market
knowledge and contacts in advance so that we can respond personally and
professionally with helpful referrals. That is the "response-oriented"
side of our work, beyond the research content which we can openly share
through our websites, but we can also perform custom market research and
marketing work as a more proactive service to assist clients as above
according to their own interests at the time. We openly disclose
current or prior working relationships with communities or professional
service providers for independent referral purposes, but corporate project
plans are of course handled in confidence according to the direction of the
executives who request our assistance.
Contact Bruce
Donnelly in Chicago at TEL 847-304-4655 or by
e-mail : bruce@gdi-solutions.com for project assistance or to
offer suggestions and corrections, such as additional or updated website
links or contacts. |
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