Latest in Corporate Location Strategy

By Joel Burgess

Whittaker Associates

Corenet Michigan Chapter invited Dennis Donovan, principle of Wadley-Donovan-Gutshaw Consulting, to Livonia, MI to present on the Latest in Corporate Location Strategy. With Dennis’ permission to report, below are a few of my “take-aways” from his course:

Current Relocation & Expansion Activity:

1. Levels: Down 10-15% in 2008, expected to rebound in 2009
2. Most Active Industries: Bio/Pharma, Medical, Scientific Instruments, Food Processing, Distribution, Back Office, Call Centers, Shared Services, and Data Centers
3. Most Activity by Region: Concentrated in the Atlantic Sunbelt (Virginia to Florida), Texas, and Inter-Mountain (Idaho to Arizona) regions because of infrastructure improvements, human capital, and business climate

Global Strategies: 18% of expansion/relocation activity in the US is foreign investment

Factors Influencing Relocation & Expansion Decisions (in priority order):

1. Labor Market – present and future – supply cost, and quality
   1. Most locations are branch location
   2. 60% of the jobs required are entry level
   3. 20% of the jobs required are skilled
   4. Favorable labor ratios
      1. 3:1 for employment surplus
      2. 200:1 for particular occupation
      3. 200:1 for total population
2. Logistics/Transportation
   1. 10% of projects require rail transportation
   2. Backhauling presents the biggest opportunities
3. Electric Power – capacity, generation, and reliability
4. Available Buildings
   1. 70% of clients seeking existing building
   2. For call centers: 3% employment in market is saturated
5. Risk of Natural Disasters
6. Incentives
   1. Tax Credits preferred

Attracting Talent in High-Tech Firms (in priority order):

1. Compensation
2. Benefits
3. HR Practices
4. Career Advancement
5. Training
6. Achievement Recognition
7. Company Reputation
8. Internal Work Environment
9. Onsite Amenities
10. Challenge of Job

Strategies for Offshoring (in priority order):

1. Risk – socio, political, and financial
2. Cost of Benefits
   1. US roughly 25%, other countries greater than 50% of compensation
3. Cost of Extraction (layoffs, closures)
4. Infrastructure
5. Safety

For more information regarding Dennis’ presentation, you can visit the CoreNet website (www.corenetglobal.org) and click on the Michigan Chapter.