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Ranked #9: Proximity to Major Markets

It's clear from the responses to Area Development's 2005 Corporate Survey that proximity to major markets is increasingly driving the location decision.

Oct/Nov 06
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How do we explain off-shoring?
Therefore, if proximity to major markets - or closeness to customers - is an important factor in choosing a location, why are many companies off-shoring jobs to locations that are half way around the world from their customers? The answer is in the business model dictated by the customer.

Some 70 percent of the respondents to Area Development's 2005 Corporate Survey were from the manufacturing sector, and 15 percent of the respondents were from the distribution sector. Collectively, 85 percent of the respondents are clearly driven by supply-chain evaluation and influence. The respondent companies have learned to fit into their customers' location expectations and - in the case of both manufacturing and distribution - physical closeness is essential.

On the other hand, in most cases involving off-shoring of employment, it is the service sector making these decisions. These location choices are still driven by customer mandate of product cost, quality, and delivery time. Off-shoring allows for a less costly product and an unaffected delivery time (via electronic transfer), although, in some cases, quality is still under review. In these instances, physical proximity is not expected by the customer.

As the annual survey continues to report the trends and changes in corporate thinking, keep an eye on this dimension. Also, keep in mind that American industry, generally speaking, has now reached a level of maturity, and finding "new markets" is rather difficult - geographically speaking.

Les Cranmer and Art Wegfahrt are location and real estate consultants in the Corporate Services Practice at Studley, Inc. Together, they have over 60 years experience in advising corporations on strategy, location selection, and implementation.

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