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Business Development Outlook Magazine: Apparently the magazine, AKA BDO Magazine or Outlook, is no longer in print. We (who we are) attempted to make contact through www.bdomagazine.com (2009) without success. Wikiben.org, The Recycle Bin of Wikipedia, has an archived article about the magazine, which appears to confirm our findings that that it no longer exist. The following reprint of a 2007 article from the magazine is tied to About Site Selection. It also serves as an example of informational resource contributions we are are delighted to receive from .network users and publish without cost or obligation. We hereby acknowledge the defunct magazine's contribution to our share network. The Essentials of Successful Site Selection This article addresses the basics of successfully choosing the right location for office and industrial facilities. We first discuss the most salient trends influencing corporate site selection in the second half of this decade. Subsequently a structured four-phase process that should be followed, irrespective of industry, is outlined. Sample data sources for procuring requisite information on candidate locations are highlighted as well. Trends Today we operate in a truly global economy. Therefore, most companies have adopted a multi-shore strategy aimed at serving global markets in the most efficient, cost effective, and risk free manner. One of the first tasks facing corporate executives on location projects becomes determining how the proposed new operation fits into the company's worldwide growth strategy. This requires a keen understanding of the drivers underlying the new capital investment. Drivers include: 1. Market penetration 2. Cost reduction/containment 3. Risk minimization 4. Knowledge acquisition Once this determination is made, the geographic focus for the location search should become clear. This could involve focus on a specific region (e.g., South America) or country (e.g., Chile). Once the strategic fit of the new entity is defined, there likely will be overarching considerations for ascertaining the ultimate location as noted below. As we proceed into the second half of this decade, several locational dynamics are assuming primacy in the site selection decision-making equation. These include the following:
The above considerations are, generally speaking, the paramount criteria shaping location decisions for corporate facilities. We now turn to the process that companies should follow when siting new facilities. Before leaving this section, another growing trend worthy of mention involves companies locating new facilities in small towns/rural areas. This is most applicable to traditional manufacturing, distribution, and back offices such as customer service centers. Prime forces behind this trend include cost minimization, labor market dominance, and maximum assurance that the final location will be capable of sustaining advantages well into the future. This trend is evident throughout the world. Examples include western and northern China, less economically developed countries of Eastern Europe, and off the beaten track communities in the U.S. In large measure due to labor market and cost factors, we see the trend toward locations in small towns/rural areas intensifying over the foreseeable future. Location Decision-Making Process / Overview A systematic process should be followed to assure certainty that the ultimately chose location will maximize potential success of the new business enterprise. If this process is assiduously adhered to, the optimal location for the subject business will emerge. The process requires that the company's project team understand the business drivers/objectives. This understanding will then be translated into a proper weighting of locational criteria. These criteria will guide the entire decision-making process. The nutshell, they are:
Typically the four-phase process will require 12-24 months to complete. The most crucial elements of each phase are enumerated below Phase One: Planning In essence this phase entails creation of the informational building blocks that will underlie the entire study. A project team will need to be formed, consisting of several internal members and possibly an outside advisor. Importantly, it has been our experience that site selection teams should be led by an operation’s senior executive. Other cast members should be drawn from the following disciplines:
Once the team is assembled it will be necessary to generate the following:
Business operating requirements for the proposed entity:
Once the information gathering effort is completed, the team should prepare a summation for sign-off by top management. Subsequently, the analytical portion of the exercise begins. Phase Two: Screening Within the geographic search region (which could encompass a few states, the entire country, or multiple countries) a systematic process should be followed, ending up with a shortlist (generally three) of highly qualified (finalist) locations. These areas would be carried forward to the next phase of the analysis. Screening varies somewhat for multiple vs. single country studies. For the former we often screen at the country level until a handful of the most favorable emerge. Then we rely on typically sparse published data and more importantly on trusted secondary information sources (such as country embassies/consulates, international business service firms with local offices, contacts at companies with branch operations, and inward investment agencies) to create a shortlist of localities for each country. By contrast in the U.S. (i.e., single country study) the geographic emphasis will be at the metro or county level. And in the U.S. published data are more comprehensive and available. The first test in single country screening is to initially apply elementary criteria (e.g., population size) to define the universe of locational candidates. For instance, on a manufacturing project, this could involve all counties with a certain population threshold that are within 10 miles of an interstate highway. In a situation involving a back office, an illustration of baseline criteria could be all metro areas with a minimum population size that are no more than 60 minutes from a medium hub airport and have less than 10% of the workforce employed in financial services (typically a high wage, white collar sector). Once the study universe is delimited, the field must be trimmed until a long list of potentially suitable locations (maybe around 10) appear. This whittling process requires desktop research to differentiate areas on pertinent factors. Be sure that your team has agreed to any deal breakers that automatically reject any area no matter how appealing on other variables. Examples include over concentration of a specific industry employment base, under concentration of specific skillsets, higher than average union presence, absence of nonstop air service to HQ, high natural disaster risk, and lack of an available building, etc. To launch the screening procedure, we find it efficient to first create factor categories such as population, labor force, transportation, etc. Then identify individual factors under each category (e.g., size, growth, age and diversity for population). In a spreadsheet, display the data for all contending areas. Do so in alphabetical order (by area) and rank order (high to low for each data set). Then eliminate areas falling below the midway point of the full data category (like population). Before final elimination look over those in the bottom half to see if intuitively any should be provisionally reinstated. Exhibit One illustrates typical early screening stage factors for workforce. In effect, the ‘keep and cut’ procedure is replicated for all location factor categories. This culling initiative should eventually reduce the field to a manageable number of contenders (long list). Fortunately, there are many databases that can furnish relevant statistics by metro area or country. Examples of some of the most widely used databases appear in Exhibit Two. At this juncture it will be necessary to prepare and send a brief questionnaire to the appropriate state and/or local economic development group. You will be seeking to gather more in-depth knowledge on each area’s operating environment (e.g., major labor market competitors) as it might impact (positively or negatively) the business unit in question. Most frequently requested information is delimited below: All Direct labor market competitors
Phase Three: Location Evaluation In this phase the company’s study team conducts a first-hand investigation in the three (or possibly more) finalist (i.e., shortlisted) areas. Field itineraries can be arranged by the lead economic development organization. They will abide by confidentiality rules if requested. However, if the project is ultra sensitive, it is a good idea to have the ED group sign a confidentiality agreement. The field team’s first visit should be limited to one or two members. The team would spend 2-3 days in each area. Principal tasks would include the following:
Post fieldwork there will be frequent follow up with the lead ED group. For instance you might need more detail on tax issues, utility infrastructure, and certainty of fast track construction. Each location must now be assessed on how well its attributes match the company’s overriding criteria. This requires judgment on how major factors (e.g., labor costs) are likely to change (for good or bad) over time. Also beware that when analyzing factors, take into account the effective economic area – not a political boundary. For example, it is likely that over 75% of new hires would live within 30 Shortlisted locations will be contrasted and rated on innumerable factors. The most common are denoted below. I. Labor market
II. Logistics
III.Real Estate
IV. Utility infrastructure (capacity, reliability, cost)
V. Taxation
VI. Incentives
VII. Regulation
VIII. Quality-of-life
IX. Multi-year business cost forecast (actual and NPV)
The comparative analysis should yield a winner (best location) and acceptable alternative (runner up). At this point the team presents conclusions/recommendations to top management. If top management approves, the team enters Phase Four of the process. Phase Four: Site Evaluation This is similar to the location evaluation Phase (Three). But in this phase, the team drills down on shortlisted sites/buildings. Typically the focus will be on two locations (number one and two ranked areas). Frequently the team is now expanded to include the following expertise:
Phase Four often begins by issuing a succinct request for proposal (RFP) to property owners that had attractive sites/buildings per Phase Three. The field is then narrowed to 2 or 3 properties in both locations. Formal negotiations now begin in earnest. Real estate must be coordinated with incentive negotiations. Due diligence on sites and other selected issues (e.g., state tax law) is conducted. Typical factors addressed are:
Eventually one site will emerge as the best choice. Ideally this will be situated in the preferred (number one) location. If it is not, then the big picture trade About the Author: Dennis J. Donovan is a principal of Wadley-Donovan-Gutshaw Consulting based in Bridgewater, NJ. Both Dennis and his firm have been advising corporations on office and industrial location for over 30 years. |
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minutes of the worksite. But for quality |
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