Site Selection – The Atlantic Divide
While the process by no means applies to every company, those that are considering expansion often consider the use of private firms (like All Out Location!) to provide strategic advice on where they should locate. While the terms “site selection” or “corporate location advisory” have slightly different connotations (i.e. the former implies going further towards implementation than just choosing a city), they also often signify whether we’re thinking about the US or Europe. Certainly site selection is the more common term in the US, but the activities of the private consultancy are far more diverse than an investing company might expect. So, if a US firm is thinking of expanding in Europe, (or a European firm to the US), what does it need to know that might differ from the process it’s familiar with? Here are six points that demonstrate this challenging environment:
Incentives, incentives, incentives: US economic development is heavily focused on providing a sweetener to an expanding company, and as such these incentives become a major area of competition between locations. A good illustration of this can be found here. In Europe though, or at least within the EU, incentives are regulated, such that regions are only permitted to provide an incentive up to a certain ceiling, dictated by the relative wealth of that region (in other words, no incentives for an office in central London!). This does not mean that the US economic developer ignores all those important factors like labor, infrastructure, cost etc, and indeed the trend is slowing moving away from incentives, but nevertheless the focus is still different.
Requests for proposal: While not unheard of in Europe, the use of RFPs sent to economic developers in US site selection tends to be the common approach to information gathering. The US Economic Development Organization (EDO) will primarily be charged with researching data, rather than in Europe where the consultant will normally be the main researcher with the EDO helping to fill the gaps.
The consultant’s role: Because of the above two points, the site selection consultant often plays a slightly different role in the US to that of Europe. They are less of an advisor, and more of a negotiator. This essentially means that they will liaise with EDOs in looking to secure the best deal for their client, and will collate the different RFP responses. In this context, US site selection advisory is a bigger, competitive industry with many consultants out there – in Europe it is more of a niche.
Sector specific: A large US site selection market also allows for specialization, where consultants will often focus on a small number of sectors. The European market is more generalist.
Domestic focus: This all takes place in the context of a different geographical focus. US site selectors are very much focused on the domestic market, such is its size, but in Europe by its nature much of the activity has to be international.
National economic development: In much of Europe, the national EDO will support the company or site selector in narrowing its options of potential feasible locations within the country before the detailed research begins, thus the process is expedited. In the US, SelectUSA must be location-neutral. Hence if an overseas company is coming to the US, all 50 states are entitled to know about it and compete. So, plenty of negotiation for the consultant!
The above does not suggest there is a right or wrong way of providing location advice, but for a company unaccustomed to the process on the other side of the Atlantic, there is a learning curve that should not be underestimated.