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The impact of 2011 economic slowdown on the development of Airport Business Parks

Thursday, December 22nd, 2011

The Aviation industry is feeling the impact of the current global economic slowdown. That is having an immediate effect in the logistics sector; the airfreight volumes have fallen sharply and are not expected to recover soon. This has an impact on developments centered on logistics. Many plans are halted waiting for better times. Despite of that, other plans are based on a more diversified portfolio than logistics alone, and we still see major developments in progress in places like Berlin Brandenburg, London Gatwick and Zurich Kloten.

The vision of Dr. John Kasarda, as he lays down in his book “Aerotropolis, the way we will live next”, is not yet in full deployment, but there is a strong trend to select business locations on their connectivity by air, as we did in former days by ships, railroads and cars. Many of our current Metropolises originated from those junctions.

Airports try to arrange transport to the final destination of business travelers in a hassle-free manner, but success is limited and congestion always a risk. So more and more companies chose to shorten the total trip time by setting up operations at, or very close to, the airport. By modeling these locations as business parks we create a successful business environment, further enhanced by themed clustering. This also encourages Business Service providers to set up at these locations.

The outlook for air travel remains positive, of course motored by developing economies, but also Western airports expect continued growth. In the Far East there are good examples of newly constructed airports with room for economic development integrated in their design, in Europe we also find that at Berlin Brandenburg (new airport with integrated business area’s) and Paris Charles de Gaulle (as the result of the visionary design made decades ago). Places like Copenhagen, Amsterdam and Munich have ample room for similar developments. In the USA Detroit and Dallas-Fort Worth also focus on developing the airport as the motor for wide spread economic development.

If projects meet market’s demands, there is a huge interest in business locations combining excellent connectivity by air with good business environments.

 

By Ruud Storm, Founding Partner at Global-Arena.com and Captain Boeing 737 NG at KLM

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Social Media is becoming increasingly important for Economic Development Promotion, said IEDC and DCI

Thursday, September 22nd, 2011

According to a recent survey presented at the International Economic Development Council  (IEDC) Annual Conference this week in Charlotte (NC), USA, more Economic Development professionals are embracing Social Medias to promote their business locations at regional level as well as at national and international level.

The survey, which involved 307 professionals in the Economic Development sector, was carried out by IEDC and Development Counsellors International (DCI). The findings indicate that a growing number of economic development agencies are implementing Social Media. 63% of the professionals confirmed that their organization is using social media since less than one year, while 30% of them said that they have been using social media for 1 to 2 years now. A good number of the professionals recognized that social media will become increasingly important in the coming three year.

The results in numbers:

  • 57 % of the 307 interviewed responded that their organization use social media within their communication efforts.
  • 77% of the staff members managing social media are full time and have other responsibilities.
  • 41% use social media to communicate frequently or very frequency at regional level, while 30% uses social media with the same frequency to communicate nationally and internationally.
  • LinkedIn and Facebook, in this order, are considered the most valuable social media to communicate inside and outside their regions.
  • Social Medias are used, within the region to communicate: organization news (28%), Project wins/ Expansions/ Retentions (21%), support for local businesses (19%), and local events (18%).
  • Economic Development organizations that were mentioned as using social medias in the most effective way are: Indy Partnership, Metro Orlando Economic Development Commission, Metro Denver Economic Development Corporation, and Gwinnett Chamber.

Global Arena recognizes these findings in its own experiences. The fact is that more economic development organizations (EDOs) and investment promotion agencies are looking for new ways of promoting their business locations online. From our personal experiences offering Location Marketing Solutions, we can say that American economic development agencies having taken a proactive step in this matter during the past 12 months. European and Asian investment promotion agencies (IPAs) are still holding a step back regarding the importance of promoting their business locations online.

In the context of IEDC and DCI survey results, Global Arena encourages IPAs worldwide to take the leadership and spread the word regarding what the regions and business locations have to offer to investors. If IPAs and EDOs don’t communicate the competitiveness and business advantages of their regions for investment attraction, who will?

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Understanding Operational Efficiency in High Growth Markets

Wednesday, August 3rd, 2011

A relentless focus on operational efficiency has been a feature of the last business decade. Organizations addressed the challenge by converting work into commodity packages that could be out-sourced or off-shored. Beginning with routine, easy stuff, there was rapid growth in labor arbitrage – moving work to low-cost locations. The immediate and positive impact on the cost line accelerated efforts to commoditize increasingly complex work packages. The snowball effect accelerated the process: companies scrambled to move more and more work to cheap and cheaper locations.

In my opinion, it wasn’t the snowball effect, it was the lemming effect.

  • Efficiency is not the same as effectiveness.

Is it wise to do the wrong thing the cheapest way? Instead of embarking on an effort to reduce the help desk cost per call, would it be better to invest in an engineering effort aimed at eliminating defects that lead to help desk calls in the first place?

  • The location may be low-cost, but its people won’t want to remain low-paid.

Off-shore locations have huge retention challenges: annual turnover of 40% is ‘good’. This means that two people must be hired to handle each job. If labor movement is easy, the situation becomes even more difficult. For example, a multinational enterprise recently decided to place a shared service center in Poland because of a large, highly educated, and English-speaking workforce. That workforce emigrated before the center was finished and workers had to be imported from Romania. It is always a mistake to ignore the drives of human initiative.

As business activity in the low-cost locations increases, costs become less low; companies respond by moving to the newest low-cost location. Carried to an extreme, companies discover that their only core competency is job movement.

  • Organizations rely on people who are social. 

No matter how many Emails, Tweets, Skype calls and Video Conferences are read, written, heard or viewed, people work best when they are close to their colleagues. As work is commoditized, employees come to be viewed (and sometimes view themselves) as replaceable automatons devoid of unique and valuable capability or wisdom.

It may not be trendy to say, but business success (especially innovation) depends on teamwork and social cohesion. As the song goes: “People need people”.

Compartmentalization has an insidious underside. Near-term cost advantages are easily visible; long-term negative impacts take longer to surface. This often means that the person who took the ‘hard decision’ to move work to a low-labor cost destination is promoted before the long-term implications of the decision becomes clear. Others, working to clean up the mess, may even find themselves blamed for the mess.

These challenges can be ameliorated if companies deliver on the promise that “our people are our most important asset”. A company achieves great results when a team of people work together toward a common objective. An article (“Here’s something to write home about!” by Thorsten Amann) in April 2011 KPMG’s High Growth Market Newsletter, explains one way that companies can create value by (literally) mobilizing their executive workforce.

In the coming years, success will depend on shared effort of teams of human beings that can work together. After a long walk, eh, sprint through the wilderness, the business world is beginning to change: the pendulum has begun a return journey.

By Dan Martin, CIO @Global-Arena.com

 

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12 Tips to succeed in High Growth Markets

Thursday, May 26th, 2011

At the Annual Investment Meeting Dubai 2011, where our CEO, Peter Storm delivered a key-note speech on future FDI developments, we met with many CEO’s of multinational companies and high-ranking government officials from Emerging Countries, or, as they prefer to call themselves, High Growth Countries. One of the topics we discussed was the large variation in success achieved by multinational companies expanding into High Growth Countries and Regions.  I think that this exchange of ideas is worth sharing, so I’ll try to summarize the conclusions in this article.

Why are some companies more successful than others in establishing a market position in Growth Markets? Or  another way of putting it is: Why are some very well established companies not able to reach the same position in High Growth Countries? In this last statement you find the key to the mistake most commonly made: What works well in Established Markets, will also work in the New Markets. Said that, bellow you will find 12 Tips to succeed in High Growth Markets divided in 3 different areas: market entry, corporate control, and product development.

Market Entry:
•    Unless you are amongst the likes of Gucci, Ferrari or Prada, a brand name in the Western World is of little significance in an High Growth Country
•    When you enter a market early, a good branding policy and overall presence can give the perception of a market leader, also when you are not a world player
•    Branding and presence should preferably be done by staff originating from the market you are trying to penetrate, connecting to your potential clients is essential.
•    Set long term goals and do not expect positive returns any sooner than in your other markets
•    Expect economic downturns to be steeper than you are used to, but also the bounce-back will be stronger. Many companies gave up on the first local crisis because it looked so severe, keep thinking long-term

Corporate Control
•    Make sure that local management consists of local managers that you assign a coach from your international management. Give your local management team long term goals and a mandate to adept to rapid changing market conditions. Small, agile marketing teams with “room to manoeuvre” prove to be best performing in Growth Markets.
•    On Head-Quarter level, have a dedicated Director for High Growth Markets. Flexibility is the key to success here, long established Sales & Marketing routines will limit you too much.
•    As Mr. Kleisterlee, who just stepped down as CEO of Philips put it: “We only see significant growth possible in Emerging Markets, and we have to reflect that approach in our Board as well, I expect at least two members from Emerging Markets to join the Board of Philips soon”

Product Development
•    Set up R & D centers in the region that you want to penetrate, staffed by local employees. This gives you a strong connection to your potential clients
•    Set up brands that are perceived as local brands, consumers in High Growth Countries do tend to take pride in buying locally developed and produced products.
•    Include not only your product in “localizing” efforts. Packaging, Advertising and choice of Sales Channels are equally important to success
•    Consider to “downgrade” your product portfolio to serve market needs. Achievable products creating a quick win for their users will precede more complex and capable ones.

I hope this summary adds to your considerations and discussions in relation to how to succeed in High Growth Markets.

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Develop Talent in the High Growth Countries

Tuesday, May 24th, 2011

The only constant about modern business is change. Whilst change may be inevitable, it is not easy. In the past several years, the entire way that companies operate has been transformed. Things that used to be core competencies like manufacturing, design and sales have been outsourced. One major computer manufacturer notes that more than 75% of the computers that they sell are never touched by any of their employees: manufacturing is outsourced while sales and maintenance are provided by partners. A long, long time ago help desks were staffed locally; now they usually located (in a galaxy) far, far away.

Making this all work requires people. Traditionally, many of these people, especially in emerging markets, were expatriate managers. In a recent posting of McKinsey Quartely, called “Beyond expats: Better managers for emerging markets”,  Jeffrey A. Joerres, CEO of Manpower, introduced the concept of ‘reverse expatriation’ – and the coming end of the traditional western expatriate manager because:

  • It’s not scalable.

Increasingly different parts of almost every company’s value chain are done in different places. Simply speaking, there are not enough skilled people to sustain the expatriate tradition.

  • It’s not effective

High Growth market contributions are expanding so quickly that the knowledge and expertise necessary to productively manage the effort is more likely to be locally grown than externally injected.

  • It’s not smart

Limiting opportunity for local staff is a sure way to create an employee retention challenge. Many companies in emerging markets face employee turnover rates in the high double digits. Continuous replacement of trained and experienced employees with brilliant, but naive newcomers is not a recipe for success.

Joerres proposes formal mechanisms to bring the skills of the emerging market manager into the larger corporation.  The basic approach is to rotate local managers through corporate offices and functions.

I believe that it is equally important to rotate people from traditional offices through high growth market locations because people must be in a position to learn from each other. Companies will want to institutionalize their core values throughout their organizational domain whilst simultaneously discovering and embedding new approaches to, for example, improve execution.

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FDI bounces back, but in a changing landscape

Monday, January 24th, 2011

“FDI will increase, some even envision a growth of 20%” , this can be read in the report “Winning in a polycentric world” by Ernst & Young, in cooperation with the Economist Intelligence Unit. An interesting differentiation is made between the emerging and the developed world, where companies have well developed business models and asset bases, but have to deal with slow growth opportunities. In the emerging markets, this situation is often reversed. Multinational companies should have business models that allow multiple speeds, depending on the location of business. Emerging markets require agility, and fast response-to-markets, where developed markets are more dependent on efficiency and incremental growth. Meeting this range of demands requires a flexibility at Board level that can be met by creating diversity in the Board, both on geographical background and on experience.

One area where this diversity in local approach will become visible is R&D. Currently, most multinational companies concentrate their R&D in the developed world, with only 16% of their R&D investments in emerging countries. Within 3 years, it is expected that at least 25% of R&D investments will be allocated to emerging countries. A clear signal to Multinationals, but also to Agencies attracting FDI.

Another area that will see a different approach in the coming years is the weighing of the local political environment in investment decisions. Right now, the only factors taken into consideration regularly are taxation and economic growth potential. A better understanding of the political environment, and what that might mean for the future of doing business in a certain country will become much more decisive in the coming years. Global Arena is already investigating what independent and comparable parameters can be used to assist our clients in making investment decisions, taking political environment into this consideration as well.

In short, another indicator that globalization is a strong driver for increased FDI, but globalization will not flatten the market to such an extent that the balance between scale and local relevance allows for a generic approach worldwide. Only companies that have a careful strategy on business allocation and a locally centered business approach will have the full benefit of geographic spread of their activities.

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Chinese FDI in your region; a blessing or a Trojan Horse?

Sunday, January 9th, 2011

Chinese investments abroad will hit US$ 60 billion over 2010 (According to MOFCOM, the Chinese Ministry of commerce), and if you add investments abroad originating from Honk Kong, have even topped US$ 100 billion. In some regions the question arises whether Chinese Investments are not becoming a threat for a balanced economic landscape. The acquisition of a large plot of land near Piraeus, Greece, with the intention to create a China controlled point of entry for Chinese goods into Europe certainly aggravated such concerns.

China is transforming from a cheap production location to an economic world power. In that light it is to be expected that China is looking for further control on the product supply and distribution chain, in the same manner Western and Japanese companies have done in the past. The economic signposts are changing, and an increased Chinese presence overseas is a logical consequence.
If we look at what Chinese companies are investing overseas, we seen a vast majority of the FDI investments is made by “state” companies. In China, every company regarded strategic is de-facto a state company. Private companies are maturing in a rapid pace, but still see major growth opportunities inside China, due to the steady rise of consumer spending there. The state companies are more prone to long term government visions, they tend to invest with a scope of at least 20 years ahead.

With this in mind, it is my opinion that the mere fact that China invests overseas is an economic reality to be expected. If it feels threatening to deal with state controlled (overt or covert) state companies with their vast financial resources, do take into consideration the acquisition channels that have been used to source the companies investing in your region. Given the fact that also privately-owned companies in China are considering overseas investments, try and source these parties to attract them to your region. Do keep in mind that every investment abroad over US$ 1 million requires Chinese Government approval

This is exactly the reason why global-arena.com is working on the ChinaConnect initiative. Together with MOFCOM we aim to create a platform where Chinese companies looking for investments abroad and business locations can meet and select the ideal partner, using our GlobalArenaRank matching technology. we hope to inform you soon on a timeline for first commercial use of ChinaConnect

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Business Alliance between Global Arena AG and Katsura Suzuki Consulting

Tuesday, November 2nd, 2010

Energizing Japanese business to expand globally and business investment between Japan and Switzerland

Katsura Suzuki Consulting (KSC), based in Switzerland offers business consulting services and network support to global-operating Japanese clients and Japanese companies relocating to, or investing in Switzerland and similarly for Swiss companies with business interests in Japan.

Global Arena AG, also headquartered in Switzerland, offers the worlds largest and most extensive global marketplace of business locations and related services through its website (www.global-arena.com). Location decisions are supported with Global Arena Rank™, an advanced algorithm providing objective location rankings. Global-arena.com is the only globally comprehensive resource for Foreign Direct Investment (FDI) information.

Implementation of location and foreign direct investment decision involves a wide variety of partners including corporate real estate, taxation, human resources, finance and legal services.

The KSC/Global Arena alliance makes it easier for Swiss and Japanese companies to go global, by offering FDI marketplace transparency and ranking services to Swiss and Japanese business partners. At the same time, the KSC/Global Arena alliance will reduce FDI transaction costs, as well as simplify and accelerate implementation of these decisions.

To read more about Katsura Suzuki Consulting, please go to www.ksc-global.com

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Metropolitan areas on the rise

Wednesday, April 21st, 2010

When a company is looking for a business location to set up new operations or to expand its business, decision makers have to take several macro-economic location factors into account in order to make sure the general macro-economic environment provides the necessary fundamentals for stability and to ensure the company’s long-term continuity and profitability together with the necessary elements for sustainable growth for its business.

Several criteria determine a location’s overall potential to attract foreign direct investment. First of all, the necessary economic criteria need to be fulfilled for a company in order to take a specific locality into consideration. These vary from favourable and competitive labour costs, a high workforce productivity, favourable capital and fiscal incentives under the form of reduced taxes and capital grants to support innovation initiatives, to high quality infrastructural requirements that offer not only the necessary ICT infrastructure that is vital for information transmission but also provides the transportation means that are crucial for workforce mobility (road and rail infrastructure, the vicinity of airports, etc.).

Secondly, talent criteria are crucial for the company’s decision-making process: the proximity of a large pool of skilled labour is a factor of utmost importance for the company’s long-term growth, profitability and is of utmost importance to ensure a continuous innovation potential necessary to obtain competitive advantages. Not only the structure and size of the labour force in the potential location or region are of crucial importance but also the quality of education, mostly characterised by the presence and proximity of universities, centers of excellence, research and science.

Finally, several location parameters define an area’s general attractiveness: demographic factors are of a tremendous importance since large populations provide the necessary market to sell goods and services and create environments with a good chance of rapid market penetration. Furthermore, highly politically stable areas with low degrees of corruption are a cost reducing factor. Moreover, skilled labour force tends to be attracted to localities with a high standard of living, prevalent in areas with a high quality of life.

The highest probability of finding a company’s ideal combination of all fore mentioned location decision factors exists in large metropolitan areas. Over the last decades, large metropolitan areas continuously seem to develop all the right fundamentals for companies to flourish, which in turn continues to attract talented workforce. As a consequence, metropolitan areas increasingly attract foreign direct investment, and will eventually be able to (re)shape a large part of a nation’s economy. Moreover, large metropolitan areas tend to merge and some even become cross-border. Do recent projects such as Yongsan e.g. prove that metropolitan areas will eventually play the most important role in attracting foreign direct investment and in the end become more important than nation states themselves?

In case you might need more information on this topic, please feel free to visit our FDI Marketplace.

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