Monday, June 29, 2009

How People Make Purchase Decisions: An Update

Despite the ascendancy of social media, customers still prepare for purchase decisions using a combination of old media, new media, and old-fashioned conversations with friends and family.

According to a March 2009 survey by Harris Interactive, the most common methods of gathering information prior to making a purchase are using a company website (36%), face-to-face conversation with a salesperson or other company representative (22%), and face-to-face conversation with a person not associated with the company (21%). 18- to 24-year-olds are more likely to use social networking sites than adults of all ages (16% vs. 4%). But they're also more likely to rely on conversations with friends and family than all adults (33% vs. 21%).

Source: The Harris Poll

Opinion: Seattle's bid to lure Russell Investments from Tacoma is a losing strategy no matter who wins

By Jim Kastama and Lisa Brown
Special to The Times

RECENTLY, Seattle Mayor Greg Nickels offered Russell Investments a tax break if the global financial company will agree to leave Tacoma for Seattle.

Although we are confident Tacoma can hold its own in this contest, Nickels' overture demonstrates an economic-development strategy whose time is past — the poaching of businesses from one region to another. Moving a company 35 miles up the freeway is not economic growth.

Any city or state that believes it can grow only by luring companies with tax breaks will be left behind in today's increasingly competitive global economy.

Businesses favor communities that are rich in intellectual capital, produce workers who are adaptable to quickly changing needs, and most of all, offer an environment with innovative people who can develop products or services that are a step ahead of the rest of the world.

This is where Seattle and Tacoma should focus their efforts — not in a tug of war that will do little, if anything, to improve the overall economy of our state.

To this end, the Washington Legislature — and in particular the Senate — has taken its lead from the state Economic Development Commission, whose stated goal is to make our state the most attractive, fertile and creative environment for innovation in the world by 2020.
We target three areas essential to this goal:

• Talent and work force — Instead of educating people for jobs they will hold for the rest of their lives, we need to instill the concept of lifelong learning so workers can adapt and excel as companies evolve. The days of one career are over; we need to prepare workers for tomorrow's changing businesses.

• Infrastructure — We need a lean, green and clean infrastructure. This means independence from the ever-rising cost of petroleum, and taking advantage of the global green economy as the Tri Cities has with its push to be the global leader in alternative energy. We must also expand broadband Internet, which will prove as important as the interstate highway system was to our country's economic expansion in the 1950s and 1960s.

• Investment in entrepreneurship — We need to attract the best talent from around the world. Our innovative STARS program already has recruited the world's best scientists at converting wood and municipal wastes into biofuels; this is the true future of biofuels, unlike soybeans, which we are discovering actually harms the environment. The economic recovery will not come from huge corporations like Boeing, Microsoft and Amazon, as important as they are, but from startup companies that will lead the world in innovative technologies and services in everything from computers to agriculture, such as our rapidly evolving wine industry.

This is the new path of economic development.

The sooner Seattle, Tacoma and the state of Washington understand this, the sooner we will stop engaging in the self-destructive strategies of competing for existing companies and get on with the kind of economic development that will position our cities and our state for global competition.

If Seattle persists in its pursuit of Russell, Tacoma is prepared. It has identified tax breaks of its own, it has recruited a nationally renowned professor in the field of business, and it has designated a downtown international financial-services area. But this is a battle that would squander both cities' resources unnecessarily.

In the best interest of all concerned, we urge Seattle to look to the future instead of its neighbors' backyards. Poaching businesses is no substitute for true economic strategy.Sen. Jim Kastama, D-Puyallup, left, chairs the Senate Economic Development and Innovation Committee. Sen. Lisa Brown, D-Spokane, is the Senate majority leader.

AT&T gone but not forgotten

By David Saleh Rauf - Express-News

In the 15 years AT&T called San Antonio home, it grew into one of the largest and most internationally recognized companies. And even after moving its headquarters, its presence is still felt in city policy, philanthropy and even real estate.

Today marks the first anniversary of AT&T's stunning announcement to move its headquarters from San Antonio to Dallas.

With it, the company plucked 700 high-paying jobs from the local economy, mostly top-level executives and support staff, and created a vacuum in the already slowing housing market.
But possibly the most significant impact the move had was the public relations black eye it stamped on the city's image.

“You never like to have bad news, and economic development is a lot about image and momentum,” said Mario Hernandez, president of the San Antonio Economic Development Foundation. “The announcement certainly took us back.”

The move has by no means crippled San Antonio, as the local economy continues to fare better during the recession than most other large metropolitan cities. City leaders also celebrate landing 1,400 professional-level jobs from Medtronic Inc. and another anticipated 400 jobs with the Air Force's choice to headquarter its new cyber command here.

One year later, city leaders say AT&T's relocation has served as a catalyst to revamp economic development strategy. In all, it shifted the focus to retaining jobs.

“It was just a wake-up call,” Mayor Juli├ín Castro said. “There's a greater appreciation for the jobs we already have and are determined to keep.” More here.

Monday, June 22, 2009

Dallas Fed chief: Businesses ripe for Texas to steal

By BRENDAN CASE / The Dallas Morning News bcase@dallasnews.com

It's time to start stealing, says the president and chief executive of the Federal Reserve Bank of Dallas.

Not money, mind you, but talent. And jobs.

Texas is one of the few big states not flat on its back from the recession. Using its greener pastures as a selling point, the state should "go out and steal everything we can from the rest of the country," says Dallas Fed boss Richard Fisher.

"That means stealing the best brains from places that are depressed, like Rhode Island and Michigan and California," he said. "Jam them into what I call the triangle, which is Austin-San Antonio, Dallas, Houston."

And why not snag some choice employers, while we're at it?

"We ought to be out recruiting every business we can," Fisher said. "No one wants to operate a business in California anymore. Nobody." More here.

Bright days ahead for SW Fla. business marketing campaign

By LAURA LAYDEN

ESTERO — Put on your sunglasses.

Southwest Florida’s new branding campaign is “bright.” Community leaders received a sneak peek at the campaign Wednesday as they met for a regional strategic planning forum at Florida Gulf Coast University in Estero.

The positioning statement is: Southwest Florida — A Brighter Place to Do Business.

These aren’t just words, said Joe Bouch, president of Chisano Marketing Group, which was hired to develop the new brand for the six-county region that includes Lee, Collier and Charlotte.
“There’s something behind it,” he said.

The word brighter refers to the quality of life and the region’s intellectual capital, including an impressive group of former CEOs and successful business owners who have retired here, Bouch said.

The word place suggests a sense of belonging.

“Every business wants to have a sense of place,” Bouch said.

The word business is key in the branding statement. Growing businesses is what the campaign is all about.

“This is our bottom line ... Our call of action,” Bouch said. More here.

Gwinnett development group sets sights on Asia business

By Patrick Fox
The Atlanta Journal-Constitution
Wednesday, June 17, 2009

Less than a month after luring NCR headquarters from Ohio, Gwinnett County economic leaders have turned their sights overseas.

Partnership Gwinnett, an arm of the Chamber of Commerce, has scheduled a 15-day trip to Asia to promote economic development. It is the latest move in a strategy that has helped attract two Fortune 500 companies and more than 5,000 jobs to the county in the past two years.

“We’re not waiting for the phone to ring,” said Nick Masino, vice president of economic development for the Chamber and head of Partnership Gwinnett.

Luring business is Masino’s business and his whirlwind trip this week to China and South Korea is packed with meetings to sell officials on metro Atlanta.

“Once you’re over there, it’s not that expensive to move around,” he said. “We want to be very strategic while we’re there.”

The trip will also include more favorable news for Gwinnett. Plans for a business expansion by a Chinese frim already operated in the country will be announced June 26 but Masino could provide no further details.

Partnership Gwinnett’s strategy was laid out in 2006 when the Chamber sponsored a $150,000-study to craft a long-term economic development plan. The nine-month study became Masino’s bible.

The initiatives: create high-paying jobs, provide a strong workforce with a model education system, offer a high quality of life and market the area to outside interests. More here.

Consulants refine marketing approach

June 19, 2009 - 7:59 PM
Jared Janes

EDINBURG — The Rio Grande Valley's cities were sending mixed messages.

As much as they said they wanted to be considered one region, too many officials don't know what other cities really have to offer, said Don Schjeldahl, an economic development consultant hired in part to grade the Valley's new regional marketing efforts.

Schjeldahl, one of a team of consultants who spent two weeks touring the Valley for the Rio South Texas Economic Council, said the marketing efforts from the individual cities detracts from the regional effort.

"They're still not telling the story well of what this region has to offer," Schjeldahl said. "It doesn't fit into the big picture."

The big picture is what Schjeldahl, a vice president for Cleveland-based Austin Consulting, and two other consulting firms are working to frame.

The groups toured Valley sites that could be a fit for expanding industries - including an advanced manufacturer who is looking at the region as a potential site - as part of an overview of its economic development efforts.

The tours were one of the first events for the Rio South Texas Economic Council, an alliance of local governments in all four Valley counties that was formed last year with the intent of expanding economic development through a regional approach.

The consultants were hired to compile marketing strategies for the area, a list of business and industry targets on which the Valley should focus and an assessment of the area's image among target industries.

Schjeldahl, who said site consultants such as himself go to places looking for reasons to eliminate them, said they were asked to be brutally honest on the area's weaknesses.

They found their fair share of weaknesses. There is no master map of the Valley that shows potential sites, its transportation system is inadequate and its statistics and demographics change depending on whom you ask.

But Schjeldahl said the Valley is poised to pull in emerging industries such as manufacturing for medical products and renewable energy if it finds a right way to market itself.

Taken alone, the Valley's cities don't have clout to woo top companies, said Steve Alhenius, president of the McAllen Chamber of Commerce. Taken together and with neighboring cities just across the border in Mexico, the region would be the 14th largest in the United States.

Hidalgo County Judge J.D. Salinas said finding a right way to sell a complex area as "one place with one voice" will help the Valley compete for economic development against others in the state, country and world.

"We're in a great position to compete if we can get our message together," Salinas said. "We need to get on the same page and market the area as a region."

Jared Janes covers Hidalgo County government, Edinburg and general assignments for The Monitor. He can be reached at (956) 683-4424.

Online Networking: Quality, Not Quantity, Matters

By Stacy Blackman

When you open your Facebook profile and see a friend request from someone you’ve never met, consider this before you hit “accept”: the more online contacts people have, the less their networking power.

This is according to new research conducted by Professor Zsolt Katona from the Haas School of Business at UC Berkeley, Professor Miklos Sarvary from INSEAD in France, and Peter Pal Zubcsek, a Ph.D. Candidate at INSEAD.

Why quantity means less quality

The study found that in order to get the most out of social networking efforts, it’s very important for people to communicate with their network. The more friends a person has, the less likely he’ll be able to respond to his network’s posts and messages. Therefore, his networking power is weaker than someone with less friends who stays in better touch with his contacts.

What this means to marketers

This study has important implications not only for those who want to harness the power of online networking, but for marketers as well. Companies have long been creating pages for their bands, restaurants, books and so on, and many make it a practice to target users with the largest networks. However, Katona suggests they may want to contact “influential” users instead:

First, if the firm wants to introduce a new product or service, the best way to market it is to target influential customers.

Second, these customers might influence other’s preferences and tastes, thus, by learning about them the firm can design a better product.

The big take away from this seems to be that whether you’re a marketer or simply a Facebook devotee, it’s important to do something with the friends you acquire, not simply collect them like baseball cards. Here’s a novel idea: instead of spending the afternoon trolling a site for new friends, take your networking efforts temporarily offline and invite a friend to lunch.

Tennessee lands billions in investment despite economy

Associated Press06/21/09 10:41 AM PDT

NASHVILLE, TENN. — Tennessee has managed to land more than $3 billion in investments since last July despite a national recession that's slowed the economy, state economic development officials said.

Volkswagen, Hemlock Semiconductor and Wacker Chemical are all companies that have announced projects in Tennessee in excess of $1 billion apiece. The projects are developing, though, as the state deals with the 10.7 percent unemployment rate reported for May.

In the past year, some 46,100 jobs were lost in the manufacturing sector, and mining and construction lost another 27,400, Tennessee Commissioner of Labor and Workforce Development James Neeley reported.

Nonetheless, State Economic and Community Development Commissioner Matt Kisber said the deals are payoffs, in part, from years of work to upgrade the state's appeal to growing businesses.

The Chattanooga Times Free Press reports Tennessee lured more than $5.4 billion in new capital investment in 2008 and is on pace for another multibillion-dollar recruitment year in 2009.

Investments from industry recruited or expanded since 2003 come to more than $27.5 billion, adding 167,419 jobs.

"In recent years, Tennessee has been on everybody's radar," said Mark Crawford, an editor for Area Development magazine.

Last year, Site Selection magazine recognized Tennessee as having the second-best business climate among the 50 states, behind only North Carolina. More here.

Monday, June 15, 2009

Recession Starting to Affect Local Economic Development

Source: Savannah Morning News
By Arlinda Smith Broady, Savannah Morning News, Ga.

Jun. 10--Even with our diverse economy, Savannah isn't immune from the downturn that's plaguing the rest of the nation.

At its regular board meeting Tuesday, the Savannah Economic Development Authority reported that it's still attracting business but on a smaller scale than usual.

In his sales report, SEDA Senior Vice President Lynn Pitts told how projects for this month have been on par with the previous years: six inquiries, seven company visits, 11 new projects and 49 total active projects.

That isn't too far off from 46 active projects a year ago.

However, there are no major employers among the prospects as there were last year with The Great American Hanger Co. bringing in 50 full-time jobs with a small production facility on site.
"Seven of the new projects are with very small companies, and half of those are start-ups," Pitts said.

He said the past six weeks have shown just how much of an impact the recession is having on local economic development.

In his presentation, SEDA President Rick Winger outlined how the prosperity in many parts of the nation has given way to rampant unemployment. The Southeast as a whole is catching up with the rest of the nation, he said, and the state of Georgia, at 9.3 percent, is slightly above the national rate of 9.1 percent.

"In early 2007, most areas showed job growth with the exception of Detroit," Winger said. "By the beginning of this year, all you see is (job loss)."

But SEDA has a strategy to bring in jobs and economic growth.

"We've revamped our marketing plan for the second half of the year," Pitts said. "We're going to reallocate funds and change the way we do business. ... When times get tight, it's a good idea to re-up marketing."

Deadline nears for plant closing: Officials marketing South Haven in effort to save 300 jobs

Sunday, June 14, 2009
Kalamazoo

BY ROBYN ROSENTHAL
Special to the Gazette

SOUTH HAVEN -- Nearly one-third of South Haven's industrial jobs likely will be lost by the end of this month when auto-parts supplier Noble International Ltd. closes its doors.

``It's a big hit,'' said Jack McCloughan, the city's economic-development liaison.

Noble filed for bankruptcy in April, and company officials said at the time that more than 300 jobs -- most of them full time -- would be cut by Friday if they couldn't find a buyer for the plant. Company officials could not be reached for comment for this report.

Area leaders have been in constant contact with the company, and earlier this month representatives of two other companies toured the plant, according to Southwest Michigan First Chief Executive Officer Ron Kitchens.

But with Saturday's deadline nearing, officials aren't optimistic that a deal will come in time to save local jobs.

``It's a day-by-day situation,'' South Haven City Manager Brian Dissette said. ``Our biggest concern is the 300 people facing potential job losses.''

Noble International Ltd. -- a supplier of laser-welded blanks and tubes, roll-formed products and steel components -- took over the facility in 2006 after acquiring Pullman Industries. The 150,000-square-foot plant, which is being leased by the company, is fitted with specialized equipment. An electrical substation is next door.

``It's really a nice, modern facility,'' McCloughan said. ``Anything can go there.''

Noble's U.S. headquarters is based in Troy and primarily serves the automotive industry, according to a company release announcing its Chapter 11 bankruptcy filing.

That release says Noble has relied on financing arrangements from its customers to help sustain its North American operations. Recently, three of its customers initiated plans to purchase laser-welded products from other suppliers, the release states.

Kitchens said Southwest Michigan First -- a private, nonprofit organization that works as a catalyst for economic development in the Kalamazoo region -- is actively marketing the facility and its work force. He said two companies toured the plant this month. Both make different products but would need labor with the same skill set.

``I feel very confident. We're not like other regions in the state where a building goes empty and we look for money to tear it down,'' Kitchens said.

Area leaders said that South Haven has a lot to offer a prospective company: a talented work force, good quality of life, proximity to Lake Michigan and tax abatements. McCloughan said the city would offer any tax incentives allowed by law, including a 50 percent discount on personal property for 12 years.

City officials would not speculate on what Noble employees earn.

Kitchens said manufacturing jobs are the highest-wage jobs in the country and critically important.

``We can no longer think of manufacturing jobs as dirty and caustic,'' Kitchens said. ``Today they are high-tech and (require a) fairly well-educated (work force). If we don't use that talent, they'll have to leave.''

Paul VandenBosch, the city's project manager, said South Haven officials are working to diversify the local economy.

Among the city's employers is BEI International LLC, which makes agriculture equipment to harvest crops. It opened in 1952. About six years ago, Spencer Manufacturing Inc., which makes fire engines, opened. Just last year, New Age/Landmark opened to make environmental testing labs on trailers.

Kitchens said that diversity will help any city -- especially this resort town -- weather this and other economic downturns.

``We simply in Michigan have lost too much talent. We have to make sure we are a community of choice,'' he said. ``We figured out having one big pharmaceutical company was the death to us. ... We've got to build that safety net.''

Tennessee: Positioned to compete

NASHVILLE — The sluggish economy isn't slowing down Tennessee's chief economic recruiter.

After landing three billion-dollar investments since last July -- including two in Southeast Tennessee -- Economic and Community Development Commissioner Matt Kisber says he's working to harvest upstream and downstream business ties to those investments for the Volunteer State.

"To have an eight-month period where we had Volkswagen, Hemlock Semiconductor and Wacker Chemical each announce projects in excess of $1 billion apiece is a trifecta that I don't think anyone imagined that the state of Tennessee would win," Mr. Kisber said. "I think we're now seeing success even in this very challenging economy."

The lucrative announcements in the past couple of years are payoffs, in part, from years of effort to upgrade the state's appeal to growing businesses, he said.

Tennessee lured more than $5.4 billion in new capital investment in 2008 and is on pace for another multibillion-dollar recruitment year in 2009, Mr. Kisber said. Investments from industry recruited or expanded since 2003 come to more than $27.5 billion, adding 167,419 jobs.

"In recent years, Tennessee has been on everybody's radar," said Mark Crawford, an editor for Area Development magazine, which awarded the Volunteer State its top "Gold Shovel" award last week.

Last year, Site Selection magazine recognized Tennessee as having the second-best business climate among the 50 states, behind only North Carolina. More here.

Sunday, June 14, 2009

Quality of Life Factors into Business Location Decision

Communities that can satisfy a company’s quality-of-life concerns — with regard to housing, healthcare, education, recreation, etc. — can make moving a business a pleasure.

Marty Weil (Dec/Jan 09)

Few people relish the thought of moving. Yet, if the new destination promised to improve quality of life, relocating might be a welcome event. While companies seldom base their site-selection decisions solely on quality-of-life issues — housing, schools, healthcare, amenities, crime — these factors do play an increasingly important role in this decision-making process, especially for those dependent on the talents of highly educated workers.

For companies relocating a relatively high proportion of professional talent, quality-of-life issues can even make or break the deal. Quality of life will directly impact the ability of a company to entice people to move with the job; for national recruiting, it will make the difference in whether or not they can attract the best talent.

Relocation advisors, therefore, parse the quality-of-life issue between those companies that are talent-driven, such as software firms, and those that draw labor from a more generic pool, such as assembly line workers. The importance of quality of life is directly related to the type of jobs being moved. Quality of life becomes far less important when relocating a traditional manufacturing plant, warehouse, or back office as opposed to moving a corporate headquarters, R&D facility, or IT center. More here.

Despite Odds, Cities Race to Bet on Biotech

By SHAILA DEWAN
Published: June 10, 2009

KANNAPOLIS, N.C. — Where a textile mill once drove the economy of this blue-collar town northeast of Charlotte, an imposing neoclassical complex is rising, filled with fine art, Italian marble and multimillion-dollar laboratory equipment. Three buildings, one topped by a giant dome, form the beginnings of what has been nicknamed the Biopolis, a research campus dedicated to biotechnology.

At $500 million and counting, the Biopolis, officially called the North Carolina Research Campus, is a product of a national race to attract the biotechnology industry, a current grail of economic development.

Cities like Shreveport, La., and Huntsville, Ala., are also gambling millions in taxpayer dollars on if-we-build-it-they-will-come research parks and wet laboratories, which hold the promise of low-pollution workplaces and high salaries.

At a recent global biotech convention in Atlanta, 27 states, including Hawaii and Oklahoma, paid as much as $100,000 each to entice companies on the exhibition floor. All this for a highly risky industry that has turned a profit only one year in the past four decades.

Skeptics cite two major problems with the race for biotech. First, the industry is highly concentrated in established epicenters like Boston, San Diego and San Francisco, which offer not just scientific talent but also executives who know how to steer drugs through the arduous approval process.

“Most of these states probably don’t stand much of a chance to develop a viable biotech industry,” said Gary P. Pisano, a Harvard Business School professor and the author of “Science Business: The Promise, the Reality and the Future of Biotech.”

“You can always get a few top people,” Mr. Pisano said, “but you need a lot of critical mass.”

Second, biotech is a relatively tiny industry with a lengthy product-development process, and even in its largest clusters offers only a fraction of the jobs of traditional manufacturing. In the United States, only 43 biotechnology companies employ more than 1,000 people, according to BioAbility, a consulting firm in the Research Triangle Park in North Carolina. More here.

Foreign recruitment to carry on despite Delta route cuts

The global reach of the world’s largest airline and busiest airport are recruiting tools Georgia economic development officials have used to woo international companies to the Peach State.

But three lauded links to Asia—with important ties for the state—will be suspended in September as Delta Air Lines Inc. slashes capacity to adjust to an economic landscape and fuel prices that have left the airline industry reeling.

Fifteen months after it launched Atlanta’s direct air link to China and a mere three months after it reiterated its commitment to the route, deteriorating economic conditions have forced Delta to suspend its Atlanta-Shanghai flights.

Also suspended come September is Delta’s non-stop service from Hartsfield-Jackson Atlanta International Airport to Seoul, South Korea, and Atlanta service to Mumbai, India.

Atlanta’s global reach will continue to be a selling point, said Metro Atlanta Chamber President Sam Williams. And Atlanta’s ties to China, South Korea and India remain strong.

But Williams acknowledged economic development officials will have to adjust, and the loss of non-stop service will be a minor “handicap.”

“We’ve had a setback because of global economic conditions, and a little more of a setback with Delta’s challenges to be profitable,” Williams said, adding he expected the routes to return once the economic climate improves.

“We’re going to continue to do everything we can to promote trade with those emerging economies with or without air routes,” Williams said.

Direct air service has been a component of the chamber’s strategy to lure investment from emerging economies Brazil, Russia, India and China. Delta has been the state’s most valuable economic development partner. More here.

Are Incentives Smart Business or Race to the Bottom?

By Conor Dougherty

An article in the Journal details the move of NCR Corp. to the Atlanta area from Dayton, Ohio. But beyond Southern states’ aggressiveness in luring Northern companies below the Mason-Dixon line, NCR’s move has also raised questions as to whether federal stimulus money is being used to fund tax breaks, grants and other incentives to poach companies from other states. The answer is kind of yes and kind of no.

To recap: NCR, which makes ATMs, scanners and other electronic kiosks, announced last week it was moving it headquarters to Duluth, Georgia after more than a century in Dayton. Ohio politicians were understandably sore over losing an iconic local company — formerly known as the National Cash Register Co. — but they went ballistic after noticing a line in the press release about the use of stimulus money.

“What we shouldn’t be doing is using taxpayers borrowed money to pit one state against another,” says Patrick Tiberi, an Ohio Congressman in an interview. “It’s insane.” Mr. Tiberi was just one among many Ohio politicians who spoke out on the issue.

For the record, that didn’t technically happen. The state of Georgia used almost $100 million in incentives to convince NCR to move to its headquarters to the state. That’s their money. Separately, NCR is building a new manufacturing facility in Columbus, Georgia, 7005 and to fund it the city applied for a $5.5 million grant from the Economic Development Administration, which is funded with stimulus money.

That grant hasn’t yet been approved, and an NCR spokesman says the project would have gone forward even if the headquarters hadn’t moved. The company and the EDA also argue the facility will create new manufacturing jobs and therefore isn’t a transfer.

“It is not the Obama Administration’s policy to use Recovery Act funds to encourage the relocation of businesses and jobs from one state to another,” said Ed Deseve, Special Advisor to the President for Recovery Act Implementation, in a statement.

Given the longstanding debate around economic incentives used to lure companies — an issue that, in general, pits higher-tax, union-friendly northern states against lower tax Southern states with right-to-work laws — it was inevitable that stimulus money would get drawn into the debate. Indeed, even before the NCR move went public Milwaukee’s mayor had concerns about the issue.

Critics of incentives say despite the Obama administration’s claim that stimulus funds won’t be used to fund jobs transfers, the popularity of incentive programs guarantees that stimulus money will be used to fund transfers, at least indirectly. NCR, for instance, will be consolidating manufacturing operations at the new Columbus facility. The company says it will stop using outsourced manufacturers overseas and in South Carolina. (It’s not clear if the loss of business will result in lost jobs there.)

Of course, all this begs the question: Do these incentives do any good to develop the economy? The theory behind incentives is that by paying for jobs, the state/county will create more jobs, which will create more tax revenues. But advocates and some economists dismiss the practice as a zero-sum game where states and municipalities are played against each other, in the process lowering the quality of life for both communities. This piece argues that in the long run jobs follow amenities, rather than the other way around.

Anyway, following the NCR victory, even some Georgians are wondering if doling out $100 million in incentives is the best way to attract business to their state.

Southern States Poach Businesses Amid Downturn

by ANSLEY HAMAN

When NCR Corp. started looking late last summer to move from its hometown of Dayton, Ohio, economic development agencies in the South pulled out all the stops in a bid to lure the 125-year-old company best known as a cash-register manufacturer.

Georgia quickly offered more than $100 million in tax and training incentives. State officials connected NCR with six Georgia research universities willing to license new technologies and train workers.
NCR and other companies are moving operations to the South. A Volkswagen plant is seen under construction in Chattanooga, Tenn., last month.

In addition to traditional incentives like tax abatements and fee waivers, local economic development leaders in the suburban Atlanta county where NCR's headquarters would be located negotiated discounts for the company with rental-car companies, airlines and landscapers. The city of Columbus, Ga., 100 miles from Atlanta, applied for $5.5 million in stimulus money to help pay for a new NCR factory. After deciding to build a customer-services center near Atlanta last year, the company last week said it would relocate its 1,250-employee headquarters to the area and open an ATM factory in Columbus.

Bill Nuti, NCR's chairman and chief executive officer, said the decision to move is a long-term strategic step, rather than simply cashing in on incentives. The move will cost millions upfront, but is "a decision that was made in the face of the recession to invest in the company's future."
Major companies have been relocating to the Southeast for decades -- lured by tax breaks, nonunion work forces, and, increasingly, ports, railroads and highway systems. But now Southern states are attempting to leverage the downturn to promote the region as more attractive during hard times -- especially compared to the Rust Belt and other regions where the economy is suffering most.

The Southeast has attracted an array of corporate facilities recently. In February, Asbury Automotive Group Inc., a major chain of national auto retailers, relocated to metro Atlanta from New York. In recent months, Tennessee announced three projects, all valued at more than $1 billion each, by units of Wacker Chemie AG, Volkswagen AG and Hemlock Semiconductor Group. North Carolina last week welcomed a new Apple Inc. data warehouse.

Meanwhile, state economic development officers say they are pursuing a higher number of relocation prospects. "The level of competition on retention, expansion and relocation projects has become more intense," said North Carolina Deputy Secretary of Commerce Dale Carroll.

Development agencies across the Southeast are therefore pushing their recruiting machines into overdrive. Gwinnett County, where NCR is moving its headquarters, revamped its development strategy in 2007 to prevent the slowing of the area's red-hot job growth. Nick Masino, the Gwinnett Chamber of Commerce's vice president for economic development, says the organization hired seven new staff and created national and global marketing teams.

Since then, the number of companies the agency is courting soared to 36 this year compared with seven in the first six months of 2007. The Gwinnett Chamber has won five projects this year—including a 75-job expansion of Habasit America, a Suwanee, Ga., belting company, and a 300-job unit of California's YesVideo Inc., which transfers VHS to DVD. The agency says it brought at least 5,000 jobs to the county in the past 24 months. Half the companies it is pursuing are based in the Midwest.

The current flow of companies southward signals a "new form of the migration of the manufacturing from the Midwest," said Ross DeVol, director of regional economics at the Milken Institute, an economic think tank. "If the Midwest can't retain more of the firms like NCR given all the downsizing that's going to occur in the auto industry and the suppliers, this could have devastating effects," he said.

Atlanta officials say they started recruiting NCR, which employs 22,000 people world-wide, in 2007. Negotiations first began around a customer-services center, which NCR announced last October it would build in Peachtree City, another Atlanta suburb.

Worried, executives from the Dayton Area Chamber of Commerce that month visited NCR, the area's only Fortune 500 corporation. But NCR provided little feedback, said Phillip L. Parker, president of the Dayton Area Chamber of Commerce. The only concern NCR expressed to him over the years, he said, was difficulty recruiting in Dayton, which was last year named by Forbes magazine as one of the nation's "10 fastest-dying cities."

Meanwhile, the Georgia Department of Economic Development was stepping up efforts to win not just the expansion of NCR's area operations—but the entire company. Officials invited NCR executives to tour the Atlanta area, including the Georgia Institute of Technology and a state job-training facility. Development officials also successfully lobbied the Georgia legislature to improve tax benefits available for projects yielding more than 1,800 jobs and either $450 million in capital investment or a $150 million annual payroll.

NCR's move is a huge blow to Dayton, coming after the closure of a General Motors Corp. plant and layoffs at Delphi Corp. facilities. Unemployment in the area jumped to 11.3% in April from 6.4% a year earlier, according to the Bureau of Labor Statistics. "We were not allowed to even compete for this opportunity to retain this company that had been started and had been very successful in our community for so many years," said Mr. Parker. "I hope they don't wake up in five years and can't even take showers in Georgia," he added, in a jab at Atlanta's recent water shortages.

Saturday, June 06, 2009

The battle for GM's HQ: Good moves or bad policy?

By Nancy Kaffer And Daniel Duggan

In the bidding war for General Motors Corp., Detroit looks like the winner.

With the promise of a 12- to 15-year tax-free renaissance zone, Wayne County Executive Robert Ficano and Detroit Mayor Dave Bing likely have trumped Warren Mayor Jim Fouts, who offered GM 30 years tax-free at its technical center in Warren.

But take a look at the big picture, and the move — announced Friday at the Detroit Regional Chamber's annual Mackinac Policy Conference — has deeper implications for the region.

“Cannibalization is a zero sum game,” said Ric Geyer, principal in Detroit-based strategic consultancy 4731 Consulting. “Our regional brand needs to rely on the strengths of our assets and opportunities that exist here. We need to be careful that we do not base our brand on the belief that we're willing to cannibalize our own companies to survive.”

In a renaissance zone, business, income and real and personal property taxes and, in Detroit, the utility users' tax, are waived.

One tower not owned by GM is occupied by EDS and already has a renaissance zone. If the Michigan Economic Development Corp. approves the request, which Ficano said the county plans to make next week, the four other towers and the Detroit Marriott Renaissance Center would also be in a renaissance zone.

Fouts raised Detroit's ire with the tax abatement offer. At a Mackinac Policy Conference session on regional cooperation Friday, Bing called Fouts “asinine,” prompting a response from Paul Gieleghem, chairman of the Macomb County Board of Commissioners, who likened Fouts' action to Ficano's effort to use renaissance zones for a Wayne County airport-based economic development effort.

“You can't have it both ways,” Gieleghem said. “You can't say Mayor Fouts shouldn't make the business case to GM. We have at the tech center 15,000 jobs. What we want to see at the tech center is growth. Fouts made a business case, and as a region, we have a responsibility to each other to say, "This is how it benefits the region, not just Wayne County.'

“ That the news was released at a session on regional collaboration was an irony not lost on Detroit City Council member Sheila Cockrel.

Cockrel said both offers are a sign of the sense of economic desperation in Michigan. “At some point, we're talking about the survival of the fiscally and financially stable,” she said. Cockrel said it's hard to determine whether offering GM a renaissance zone is a good move.

“Without knowing what taxes would be forgiven, it's hard to make that judgment,” she said. “This is one of those situations that requires careful due diligence. We need to be confronted with what that number is.”

Cockrel said that were GM to accept the offer, she's not sure when the tax cut would start — and what the effect would be on the city's budget.

“Does this increase the deficit? Do we need to make additional cuts?” she said.

Ficano said he didn't know how much tax revenue Wayne County would lose, saying he hadn't analyzed the numbers. Meagan Pitts, Bing's deputy press secretary, couldn't provide total tax revenue collected by Detroit from GM by Crain's deadline, saying that calculating the utility tax paid by GM poses difficulties because that levy is handled by DTE Energy Co.

From January to December 2008, the city of Detroit collected $8.8 million in withholding taxes from GM — that's 3.49 percent of the total $251 million in income tax collected by the city that year, according to data provided last month by the office of then-Mayor Ken Cockrel Jr., who has since returned to his post as president of the Detroit City Council.

The zone also has real estate implications because it sets up an uneven playing field among buildings in Detroit, since rent essentially will be subsidized.

On the other hand, it also could be used as an incentive to attract tenants from the suburbs.

Financial services companies, said Bill Lichwalla, CEO of Southfield-based Plante Moran Cresa L.L.C., were hit hard with the Michigan Business Tax due to the portion of taxes paid on corporate income. Moving a corporate office to a renaissance zone could mean a major savings in tax liability.

“They could have a savings in tax liability that's almost equal to what they'd be paying in rent,” Lichwalla said.

He expects that his clients looking for new corporate offices will be enticed by the renaissance zone.

“A lot of tenants have the perspective that there is a higher cost of doing business in Detroit,” he said. “The incentives available in a renaissance zone will be a big part of the tool kit Detroit can use.”

Given the fear of losing GM to Warren, landlords such as Peter Conkey are more understanding than in the past. Conkey is CEO of Chicago-based HDC Partners L.L.C., which owns and manages the Buhl Building at 535 Griswold.

“We will gladly compete,” he said. “Losing GM, we'd all pay with a greatly reduced tax base.”

Thursday, June 04, 2009

Ohio lawmakers outraged at use of stimulus funds in NCR deal

By Jessica Wehrman Staff Writer
Updated 7:12 AM Thursday, June 4, 2009

WASHINGTON — NCR's news release touting its decision to move jobs from Dayton to the Atlanta, Ga. suburbs includes one factoid that has Ohio lawmakers in a fury: The City of Columbus, Ga. plans to use federal stimulus dollars to buy a building and construct another to accommodate the 870 manufacturing jobs expected to come to the that Atlanta suburb.

"The fact that economic stimulus dollars were used to move an Ohio company to Georgia at taxpayer expense is an outrage," said state Sen. Jon Husted. U.S. Rep. Pat Tiberi, R-Columbus, House Minority Leader John Boehner, R-West Chester and Sen. Sherrod Brown, D-Ohio, also fired off angry missives. U.S. Rep. Mike Turner, R-Centerville, drafted a letter to President Obama.

There's one problem, according to Columbus Mayor Jim Wetherington. The city doesn't have the $5 million it applied for in stimulus money yet. Nor does it know if it will receive that money.

"We haven't received a penny of federal funds and we don't know whether we will or not," he said. "We put up the money - but if we could get a little help along the way, it would be good."

Still, just the possibility that stimulus money could be used to lure jobs away from Ohio has lawmakers frothing.

Said Tiberi, "Federal stimulus money is being used to create winners and losers among workers in different states and that's just not right; it's dirty." Boehner's spokeswoman also sounded the alarm.

"Ohio lawmakers who voted for the so-called stimulus package before anyone even had a chance to read it need to explain why they voted for legislation that let another state woo away Dayton's only Fortune 500 company, resulting in a devastating economic and emotional blow to our region," said spokeswoman Jessica Towhey.

And Brown was drafting a letter to Secretary of Commerce Gary Locke late Wednesday arguing that economic recovery funds should be used to create jobs, not relocate them.

Wetherington said they have asked NCR to correct their press release, and said the $8 million package they used to lure NCR included $6.5 million from the city and $1.5 million from the state. He said the city is prepared to pay the $6.5 million from its own coffers but is hoping that the stimulus money will come through and make the bill a little less steep.

If it doesn't come through, he said, he believes the city can pay off the obligation within 10 years. The city council has approved the expenditure, he said.

NCR spokesman Jeff Dudash said virtually all of the jobs that will leave Dayton will go to Duluth, Ga., not the Columbus manufacturing site. The work that will be done in Columbus, he said, is currently being done by a Columbia, S.C. company that NCR contracts with.

The Columbia site, Dudash said, "is a great facility for NCR to bring manufacturing jobs into," he said.

Wetherington said he understood that people in Ohio were upset. "But you know, they announced they were moving, they were looking for sites and our development authority jumped on it," he said. He said the city has been working on getting the jobs for about four months and were originally notified that NCR was looking or a new site for a manufacturing plant by the state of Georgia.

He said Columbus competed with a number of cities, including one in Tennessee and Savannah, Ga., for the selection.

Wetherington said he is hopeful the city will receive stimulus money for this project.

"We think this project certainly applies to what President Obama said," Wetherington said. "He wants projects that are ready to go."

Still, Ohio lawmakers appeared prepared to fight against Columbus, Ga's bid for federal dollars late Wednesday.

"I hope our federal officials will act swiftly to stop this expenditure of tax dollars that would allow one state to lure away jobs from another state," Husted said.

Turner argued if Columbus gets the money, Ohioans could pay interest on federal money spent to help take jobs from the state. And, he said, any federal money used to consolidate NCR operations in Georgia is money used to take jobs from Ohio.

“Even if it’s money for a portion of the project, as far as I’m concerned it’s being used toward the entire project,” he said.

Wednesday, June 03, 2009

Branding Goes Real Time

May 24, 2009

-By Brian Morrissey, Adweek

The Internet was always fast. Google made a point during its rise to prominence to detail -- to the millisecond -- just how quickly it delivered a search result. And, as we all know, the Web has gotten even faster.

Real-time communications channels like Twitter are pushing the Internet into "real time," where communication and information flow nonstop. This presents advertisers with a dizzying array of opportunities-and a daunting number of challenges.

Marketers "are built like battleships for long, sustained warfare, [but] this is guerrilla warfare," said Lisa Bradner, a senior analyst at Forrester Research.

One of the most intense challenges is the new speed with which messages need to be crafted. Think of display advertising, which is in the doldrums thanks to a nearly limitless supply of space outstripping ad demand. With a large chunk of the market transitioning to a marketplace-driven dynamic where advertisers, networks and agencies bid on ad placements based on people, not pages, a message -- and its permutations -- increasingly needs to be made on the fly. And this, in turn, means extra work up front.

HP, for instance, using tools from Yahoo and Tumri, recently ran a campaign with more than 20,000 ad permutations. To do this, said Catherine Paschkewitz, director of demand generation, HP Direct, "you need to take the time to think of your testing framework and the different things you want to test. It's having an up-front process as you're launching and refreshing campaigns."

Another way to make display ads more real time is to use live video. Visa, for instance, ran live video in banner ads earlier this year that showed scenes from cities worldwide. Last month, Intel embedded live chat in its banners. Earlier this month, GE CEO Jeff Immelt delivered a Webcast address on healthcare issues live in a banner ad on top sites. And Volvo and Intuit have piped Twitter into ad units.

Another challenge for brands is that consumers now expect instant gratification when it comes to customer service, which is why marketers like Apple, Bank of America and Overstock.com now provide live customer service on their sites. Kevin Kohn, evp of marketing at LivePerson, which worked with BoA and Overstock, said this is nearly a requirement in a real-time world.

To help rein in potential customers, Verizon uses data to inform it when a live chat is needed. For instance, it knows users typically drop off if they spend more than two minutes per step when signing up for DSL and can ping them an offer to chat live with a service rep after a minute expires. "If you can intercept them, not only can you save their problem in seconds, but you've kept them from disrupting how they're interacting with you," Kohn said.

Consumers also expect marketers to respond quickly no matter the issue. Take the now infamous Domino's saga. In April, Consumerist pointed to a video of two employees doing gross things to the food. Within a day, Twitter was alive with demands that Domino's address the matter.

This desire to have answers in real time, wherever consumers are, is unlikely to change, said Andy Jacobs, chief technology officer at MRM Worldwide. "Our clients find themselves in a very reactive world," he said. "They're forced to respond to things. They need methods by which they can confidently and quickly publish info through the right channels."

For corporations, this requires new strategies. It means, for instance, bypassing the normal layers of sign-off to get information out to quell customer revolts, Jacobs said.

As a result, several marketers have established presences on Twitter to stay on top of customer problems. This early-warning system can pay off. Back in December, buzz gathered on Twitter that Ford sent a legal notice demanding a Ford Ranger blogger surrender his URL. Scott Monty, a well-known Twitterer and Ford's social-media leader, quickly nipped it in the bud."

There's the opportunity to enhance your brand relevance in real time and respond to problems before they're intractable," Bradner said.

County still pursuing VW parts plant

By DWIGHT OTWELL
dotwell@cherokeescout.com
Tuesday, June 2, 2009 8:08 PM

Murphy – As early construction stages of the new Volkswagen plant in Chattanooga, Tenn., is under way, Cherokee County industrial leaders are trying to lure one or more automotive supply plants to the county.

Kathy Johnson, representing Southeast Industrial Development Association, told the Cherokee County Economic Development Association Friday that Cherokee County is in a position to serve Volkswagen and other automobile plants to the east, such as BMW.

Johnson believes that Volkswagen will use suppliers that are as far away as an hour or more from the plant.

Johnson said small companies, with as few as 15 employees, have become automotive suppliers.

“Our main thing is getting information about existing sites [in Cherokee County] out,” Economic Development Commission Chairman Tom O’Brien said.

Johnson said 7.4 million cubic yards of earth have been moved in six months at the site. On May 21, the official raising of the wall for the paint shop was done.

Although some employees from Germany will be brought to the plant, most who fill the 2,000 Volkswagen jobs and the 9,500 jobs with suppliers of the plant will be area workers, said Jill Bratina, Volkswagen of America’s media relations director.

Paul Worley, director of business outreach services for Tri-County Community College, said most of the county’s companies have been holding strong. The county lost 98 jobs because of the closure of Coats American in Marble but that was made up by gains in jobs at Industrial Opportunity Inc. More here.