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United States Inward Investing Guide

Location USA is a guide for international companies looking to invest or establish operations within the United States. Location USA provides practical advice and guidance about facilities deployment, labor force skills, taxes and incentives, and more. For specific information on all 50 states, utilize the State Resources links.

The United States: Revival of an Economic Powerhouse

Its large internal market, highly educated workers, and strategic infrastructure are steering foreign investors to the United States.

Douglas van den Berghe, Managing Director, Investment Consulting Associates (ICA) (Location USA 2012)

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The business case analysis illustrated in detail the total costs associated with the production of steel. It appeared that off-shored production resulted in a "lower price per unit." When incorporating all costs associated with goods sold, risk, and strategy, a U.S. location had a TCO disadvantage of 11.3 percent as compared to China. Is this disadvantage in TCO reason enough to move production to China? Based on ICA's research and corporate location selection experience, we think otherwise and increasingly see executives reconsidering this option as well.

As foreign direct investments are generally long-term investments, a corporate location selection team should always incorporate future trends into financial modeling. National and international statistics show that skilled wages in low-labor-cost countries have been rising at about 10 percent per year versus 2 percent in the United States. In particular, China has recently experienced labor strikes that have resulted in wage increases of 24 percent to 100 percent annually. Transportation costs are also rising again as oil prices increase, and OEMs that have sourced work overseas continue to report problems with quality, counterfeiting, and intellectual property violations. In addition, China's currency is appreciating against the U.S. dollar (on average 5 percent), which will further increase local product prices denoted in U.S. dollars.

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Figure 1: Present and forecast U.S. and China Price and TCO (click 'enlarge' to see full infographic)

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Figure 2: U.S. Global Competitiveness (click 'enlarge' to see full infographic)

Editors Picks

By forecasting the annual cost increases based on the yearly impact of wage inflation and the appreciation of the Chinese yuan, ICA has modeled the TCO for a period of five years. The results of the five-year forecast model show that the initial higher TCO in the United States will be eliminated in the medium to long run.

After adjustments are made to account for American workers' relatively higher productivity, wage rates in Chinese cities such as Shanghai and Tianjin are expected to be about only 30 percent cheaper than rates in low-cost U.S. states. And since wage rates account for 20 to 30 percent of a product's total cost, manufacturing in China will be only 10 to 15 percent cheaper than in the United States - even before inventory and shipping costs are considered. After those costs are factored in, the total cost advantage will drop to single digits or be erased entirely.

The global competitiveness benchmark, the "reshoring" trend, and the business case simulation explored in ICA's U.S. Competitiveness Report 2011 indicate that corporations should give - and are increasingly giving - more priority to the softer factors, as these embrace a lot of hidden costs. Also, as foreign investments are long-term commitments to a country, a "snapshot" of a country's investment climate alone is insufficient. Forecasting (inter)national trends adds significant perspective to the process of foreign investment decision-making. It is exactly this combination of the competitive and low-risk investment climate, with relatively stable wage inflation, increased productivity levels, and a skilled U.S. labor pool - compared to rapidly rising labor costs and seemingly overheating economies in Southeast Asia - that is shifting the global landscape of FDI.

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About the Author

Douglas van den Berghe, Managing Director, Investment Consulting Associates (ICA)
Douglas van den Berghe (PhD) is the CEO and founder of Investment Consulting Associates, headquartered in Amsterdam, and of two web-based FDI advisory products: www.locationselector.com and www.ICAincentives.com. He holds a Ph.D. in Business Administration from Erasmus University Rotterdam-Rotterdam School of Management (RSM) and was previously a director at Ernst & Young International. As a management and strategy consultant, he has assisted many corporate clients in successfully implementing their global investment strategies, their location selection, as well as optimizing their global supply chains across the world. Some of his corporate clients include Shell, Philips, Electrolux, HB Fuller, John Deere, Johnson Controls, and ING. As an economic advisor, he has also worked on issues related to foreign direct investment (FDI), economic development, and competitiveness for numerous governments, free zones, and investment promotion agencies (IPAs) in numerous countries. AHe has also worked for various international organizations like the U.S. State Department, United Nations Conference on Trade and Development (UNCTAD), United Nations Development Program (UNDP), Organization for Economic Co-operation and Development (OECD), European Commission, and the Economist Intelligence Unit (EIU). Douglas has lectured at a large number of universities and business schools worldwide including Harvard Business School, and published in several journals such as the International Business Review, Transnational Corporations, and Business Strategy Review. He has worked in many countries including EU-27, Central America, Albania, Australia, China, Ghana, India, Jordan, Iraq, Mexico, Saudi Arabia, Senegal, Ukraine, United Arab Emirates, United States, and Turkey. In addition, he has the following sector expertise: electronics, consumer products, financial services, automotive, oil and gas, chemicals, and IT.

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United States Inward Investment Location Profiles

ARIZONA

Arizona - A Great Place For Business

Arizona is one of the fastest-growing, most dynamic economies in the United States. Both Fortune 500 and start-up technology companies call Arizona home, reaping the advantages of a competitive business climate and tax structure; a skilled, knowledge based work force; and world-class innovation, cultural, and scenic resources.

ARKANSAS

Your Success Story Starts In Arkansas

Arkansas's transportation network and central U.S. location define the state as a strategic distribution center. Midway between Mexico City and Montreal, Arkansas offers a valuable distribution advantage.

Little Rock, Arkansas: A Globally Recognized Brand

For two years in a row, the Little Rock region has been named "America's Fourth Strongest Economy" by the Brookings Institution's MetroMonitor. The Wall Street Journal calls it the nation's "Sixth Best Real Estate Market," while Forbes says it is America's "Seventh Best Place for Jobs."

KANSAS

Wichita, Kansas USA - Site of Choice for Advanced Manufacturing Enterprises

Wichita, better known as the Air Capital of the World, has also been ranked #1 U.S. metro for aviation manufacturing. Wichita has the highest concentration of aircraft and aircraft parts manufacturing employment (skills) in the United States.

KENTUCKY

Kentucky Is a Global Business Center

Kentucky remains a leader in attracting foreign direct investment, with nearly 35 percent of announced new investment in 2012 due to FDI activity. Today, about 420 foreign-owned firms from 30 nations employ nearly 80,000 people in the state.

NEW YORK

Think New York for Business Opportunity

When you hear "New York" you probably think of tall buildings and Wall Street — not cows, pastures, and a state whose leading industry is agriculture. In fact, we have both, and the world is taking notice of the abundant milk supply, sophisticated transportation system, and oneday access to almost 100,000,000 consumers.

OHIO

The Columbus Region Grows Increasingly Global Each Year

The Columbus Region is a thriving 11-county area located in Central Ohio. Home to 15 Fortune 1000 headquarters, with two million people and a population growth rate of 1.3 percent annually, the Columbus Region is one of the fastestgrowing major metropolitan areas in the Midwest, and is growing more and more global each year.

The New Ohio — A Leader in New Job Creation

Profitable. Diverse. Motivated. Strategic. Global. These are the words that describe the new Ohio and make us a leader in new job creation in the U.S.

OKLAHOMA

Tulsa - Where Business Grows

Home to more than 950,000, Tulsa, Oklahoma, perfectly balances convenience and affordability with the advantages of a highly skilled work force, a central location, a pro-business atmosphere, and an excellent quality of life. It is a dynamic, growing region that offers the fifth-lowest cost for doing business in the nation and is home to some of the nation's largest companies. These assets combine to make an ideal home for progressive companies competing in a global economy.

TENNESSEE

Select Tennessee for Your Next Investment

Tennessee's ideal location, strong transportation infrastructure, low costs of doing business, and high quality work force provide an attractive setting for investments from around the globe. With most major U.S. markets within a day's drive, Tennessee provides immediate access to eight interstate highways, an extensive network of railways and waterways, and the world's second-busiest freight airport in Memphis.

WEST VIRGINIA

Plastics - West Virginia's Multi-Billion Dollar Industry

Offering one of the highest concentrations of hightech, specialty, and engineering polymer production in the world; an abundance of necessary raw materials; a knowledgeable, highly trained and productive work force; and established transportation systems; it is no wonder West Virginia is home to a vibrant and growing plastics industry.

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