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24th Annual Corporate Survey Analysis by David Brandon

Dec/Jan 10
Over the course of the past decade - and certainly across the 35 years of my experience in site selection and economic development - circumstances have combined to reveal the not so subtle changes in emphasis with which site selectors have come to regard comparative location decision factors.

Whereas once availability, reliability, and quality led the way in site selection judgments, cost has now joined the vanguard of factors in a very prominent role. Circumstances such as intensifying global competition; the rise of China, India, and the ASEAN markets; political unrest; credit market difficulties; compressed times to market; and global recession have all combined to produce the importance that site selectors have accorded to cost factors in the 2009 Corporate Survey.

Commodity and specialty producers alike have felt the sting of global cost competition. Spikes in energy costs have permeated virtually every aspect of business operations and left an impression that will not fade so quickly as in the 1970s and 1980s. Dramatic increases in benefits costs, especially health insurance, have contributed rather publicly to our cost sensitivities and have highlighted the labor costs gaps that exist between the United States and industrializing nations.

It comes as little surprise then that, in this market, labor costs has risen to the top of the list of site selection factors. Nor is it a startling revelation that seven of the top 10 site selection factors in the 2009 Corporate Survey relate directly to a location's cost profile. Labor, taxes, energy, facilities, and transportation costs dominate the top-10 landscape.

Similarly, incentives have never, in my opinion, occupied so prominent a position in searches for new sites. Tax credits have largely lost their allure. Many site selectors view them as meaningless in their efforts to distinguish between competing locations. As noted near the top of the list, tax exemptions and related state and local incentives that generate "cash" with which to reduce capital expenditures and lower start-up costs are exerting powerful forces in site selection projects across the globe.

Overall, "cost" is top of mind for site selectors today. As the 2009 Corporate Survey recognizes, location costs, start-up costs, and operations costs combine to concentrate our attentions on locations with comparatively low and stable cost profiles.

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