1

How Your Community Is (Or Isn't) Being

Evaluated for Foreign Direct Investment (FDI)

2

Your Hosts

Ben Wright

CEO, Atlas Advertising

benw@atlas-advertising.com

www.twitter.com/atlasad

Douglas van den Berghe

Managing Director

Investment Consulting Associates

douglas@ic-associates.com

Guillermo Mazier

Business Development,

Atlas Advertising

guillermom@atlas-advertising.com

www.twitter.com/atlasad

3

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. 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

4

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 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.

5

Download the slides, listen to the video, continue the dialogue

• Continue the Conversation: – Follow us on Twitter:

www.twitter.com/AtlasAd– Tweet questions using hashtag #AskAtlas– Join Next Gen Economic Development

Marketers LinkedIn Group• 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

6

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– 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

7

Audience Question:Have you worked on projects that are expansions or relocations of foreign owned companies this year?

8

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

4. How foreign-owned companies evaluate communities today: Current case studies

5. Q+A

9

Why FDI should be an important part of your strategy today

10

White House Touts 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

11

FDI is growing again, and projected to grow

Source: UNCTAD FDI Database

12

Further the US is the global leader in inflows and outflows

13

Audience Question: What are your objectives for FDI in the coming year?

14

Challenges you face

15

The federal government plays a limited role in FDI promotion

16

Foreign owned companies know just a handful of US destinations

•New York

•San Francisco

•Los Angeles

•Dallas

•Miami

17

There can be a significant language barrier for foreign owned companies

18

Comparing individual cities within countries can be difficult

19

Audience Question: What tactics have you found to be successful in overcoming these challenges in your community?

20

Trends in Foreign Direct Investment

21

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)

• 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

22

Implications for the US

• US Competitiveness for FDI “Revival of the US Manufacturing Powerhouse”

• Repatriation and Re-shoring of US companies and business activities

• Market Seeking: Traditional markets EU still of importance

• Changing Target Markets – Increased importance of Emerging Markets especially for Greenfield investments

23

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 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.

24

Volatile FDI trend pattern

25

Growing importance of EM countries for Greenfield investments in the US

Source: Organization for International Investment 2011

26

Top countries by US Greenfield Investment Job Creation – and Industry Sector Analysis

Source: Organization for International Investment 2011

27

Global FDI drivers and trends – a future forecast

1994

$256 billion

Exploiting different factor endowments

Supply chain optimization

2007 record

$1,833 billion

Relocation/

Expansions/

Offshore/sourcing

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

CRISISCRISIS

2013

$1,8 billion

28

Audience Question: What country or countries are you most aggressively targeting?

29

How foreign owned companies evaluate locations: A recent case study

30

Site visits

Journals

Newspapers

Brochures

Trade Shows

City

City

City

City

City

City

City

1990 location selection process

SIX MONTHS

City

City

31

2011 location selection process

85% of initial search = Internet

EIGHT WEEKS

Detailed info

Services

32

Corporate investment routemap

Implementation

Con

sultant

Clien

t

• Prepare site visits

• Prepare discussions with relevant

governments and service providers

• Incentive negotiations • Real estate transaction and acquisition

support

• Input cost model

Real estate support

Phase 2Phase 1 Phase 3 Phase 4 Phase 5

Site visits

• Resources for site visits• Define real estate objectives and

accommodation needs

• Define project and goals

• Business requirements

Project definition &

understanding of strategy

Comparison of costsAnalysis and comparison

of locations

• Project assumptions

• 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

Strategic AssessmentLocation Screening,

modeling & benchmarkingCost comparison Community Evaluations

A New Generation in FDI Advisory

33

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:

– 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

Phase 1

34

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

• 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

Phase 1

35

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 MexicoMexico

4. Overseas offshore scenarioChina

Phase 1

A New Generation in FDI Advisory

36

Location factor groups

BUSINESS ENVIRONMENT

FACTORS

LABOR COSTS FACTORS

LABOR AVAILABILITY

LABOR PRODUCTIVITY

ACCESSIBILITY FACTORS

COUNTRY REPUTATION

SUPPLY CHAIN MANAGEMENT

REAL ESTATE FACTORS

TAXATION & CUSTOMS

GRANTS & INCENTIVES

QUALITY OF LIFE

ENVIRONMENTAL COSTS

EVALUATION

BUSINESS RISKS

ELECTRICAL POWER

The following location factor groups were incorporated in the analysis:

Phase 2

37

Benchmarking techniques – LocationSelector.com

38

Financial due diligence

(All Amounts in € 000's)

CountryRegion Location A Location B Location C Location D Location E Location 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

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 22.618.447 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 Location 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 22.445

Rank 4 3 2 5 6 1             Total Net Income 853 849 849 861 861 843

Rank 3 4 5 2 1 6

Phase 3

Logistics

Duties

Tariffs

Utilities

Salaries

Depreciation

Local Taxes

39

Region / State Scoreboard Analyses

40

Real estate – Deal making

Brownfield solutions

Greenfield solutions

Build to Suit on Industrial Parks

41

Integrated story: where corporates meet IPA’s

•Information & Sales Packs

•Investment plans

•Policies and incentives

•Procedures requirements

•Progress and achievements

•Create awarenessImage 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-upInvestor Servicing

•Continued “account executive

attention”

•“Ombudsman” role and trouble-

shooting function

•Follow-up on manpower,

infrastructure, service needs

Aftercare and Policy

Advocacy

Phase 1

Implementation

Phase 2 Phase 3 Phase 4 Phase 5

Strategic Assessment

Location Screening,

modeling &

benchmarking

Cost comparisonCommunity

Evaluations

42

The most frequently evaluated communities in the U.S. for FDI are…

43

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)• Mental Map – Usual suspectsEuropean companies

New York

Chicago

Boston

Atlanta

San Francisco

Asian companies

Los Angeles

San Francisco

Chicago

New York

44

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– Memphis– Minneapolis

• Yet, these cities offer in many different cases an excellent location proposition with cost and risk levels well balanced

45

Q + A

46

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– 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

47

Coming to IEDC in Charlotte?

To reserve your place,

simply type “RSVP” into

your chat box.

48

Contact Information

Contact information:

Gustav Mahlerplein 109 - 111

Amsterdam, 1082 MS

Contact: Douglas van den berghe

t: +31 (0)207946081

douglas@ic-associates.com

www.ic-associates.com

Contact information:

2601 Blake Street, Suite 301

Denver, CO 80205

Contact: Ben Wright

t: 303.292.3300 x 210

benw@Atlas-Advertising.com

www.Atlas-Advertising.com

LinkedIn Profile | LinkedIn Group | Twitter | Blog |

Slidespace