Corporate Survey Analysis by Jonathan L. Sangster
In order to see if there were significantly influential trends in 2007, we decided to focus on identifying the decision-makers' conclusions (rather than analyze just the respondents' percentage changes from 2006 to 2007). Following a few high-level observations are our top-five findings.
It is important to recognize that 87 percent of the survey respondents represent manufacturing and distribution operations (essentially the same as 2006). The fact that manufacturing respondents dropped by 12 percent and distribution respondents increased by 11 percent is likely what has driven several significant shifts in the rankings of criteria. This is consistent with the location activity trends that we have observed over the past 12 to 18 months. Secondly, it is essential to acknowledge that this high number of respondents from manufacturing and distribution operations does impact the rankings significantly. We would expect corporate headquarters, service operations, and R&D operations to rank the factors a great deal differently.
The selection of regions to locate operations across the United States is not especially surprising. The majority of decision makers indicate that they would be more likely to locate operations in the eastern half of the United States and, of those, a higher percentage lean more toward the southern half of the country. Drivers are likely continued population shifts; economic growth and activity; and business and cost environments.
It was interesting to note a couple of inconsistencies in ranking results, including the fact that availability of skilled labor ranked fourth, yet training programs and proximity to technical university ranked 20th and 23rd, respectively. The focus here is likely an existing pool of skilled labor, rather than the mechanisms in place to create a future pipeline.
With those as a foundation, our top-five findings are as follows:
5. Quality of life is not a major differentiator. Other than concern about crime that might affect their operations, these decision-makers do not believe that quality of life will have a major impact on their decisions. Considering the fact that most manufacturing and distribution operations would relocate only a very small percentage of their work force from other locations, this is not a surprise.
4. Incentives - Flexibility is more important than the bottom line. The largest drops in rankings were for the three tax and incentives factors (four places each). While incentives are still relatively important in the decision process, it was interesting to note the significant increase in "other incentives," i.e., land, utility-rate subsidies, infrastructure support, etc. This is consistent with what we are seeing with our clients - they are much more interested in customized packages to meet their specific needs, largely through nonstatutory programs.
3. Can I attract and retain the work force that I need to be successful? When the business decision is made to locate, expand, or relocate an operation, the availability of a qualified work force still remains extremely important, especially if there are specific skills or experience requirements. In 2007, respondents supported this by moving this issue from number eight in 2006 to number four.
2. There is a "need for speed." It is obvious that decision-makers are seeking to make and implement their location decisions in a more expeditious manner. Factors like available land and availability buildings, the presence of environmental regulations, and expedited or "fast-track" permitting were much more important in the 2007 survey results. Available land jumped eight spots, while availability buildings debuted at 13th this year. Environment regulations jumped six spots and expedited permitting ranked 16th (71.5 percent). If these are barriers to entry in a community/state, then the community will be quickly eliminated.
1. It's really about costs. The number-one trend is that decision-makers need to put themselves into a position to be cost-competitive, whether it is in a domestic or an offshore location. Three of the top five factors are directly related to operating costs, and one could argue that highway accessibility (ranked number one) and proximity to suppliers (ranked 15th) are directly related to the cost of transportation and shipping of their products. With rising fuel costs, it is not surprising to see both of these factors move up the list.
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34th Annual Corporate Survey & the 16th Annual Consultants Survey