MOST COMMON MISTAKES BY IPIS
As shown on the next page: Checklist of the eleven most common mistakes by IPIs in
designing, implementing or communicating their investment attraction strategy.
Source: DTZ Consulting
Copyright 2005 Multilateral Investment Guarantee Agency. All rights reserved. No part of this work may be reproduced in any form
without written permission from the copyright holder. Requests for permission to reproduce should be sent to the Director,
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Working smarter, not harder,
to attract investment
It is getting harder for investment agencies to influence corporate decisions.
Investment attraction is simple in theory but hard to get right in practice...
Inward investment is important – it brings
jobs and stimulates growth. Investors bring
new contracts and customers as well as
technological know-how and new career
opportunities for local staff.
with the potential to invest. Many projects
now come in ‘under the radar’, as smaller
and smaller companies make the choice to
enter markets via direct investment rather
than through trade or other arrangements.
crept into the practices of some of the
best agencies. We identified 11 key faults.
It is our firm belief that the first principal
is critical and that it could stand alone in
terms of importance:
Inward investment is easy in theory but
hard in practice – understanding what a
location has to offer for companies is hard,
understanding what markets and decision
makers to target is hard and delivering
business attraction and development
strategies is harder still.
A more complex market requires a more
sophisticated response from investment
agencies.
Taking existing investors for granted.
Firstly, and most importantly, ‘aftercare’ or
investor development is king. The bulk of
investment derives from existing investors.
Directly and indirectly.
And it’s getting harder – with more
competition, with more specific and
exacting company requirements and smaller
project scales. Also, new types of projects
are constantly emerging and the origin of
projects is getting less predictable.
The days of a steady pipeline of ICT projects
from the US, or engineering projects from
Germany are gone. Deal flow is no longer
one-way and UK locations now face a
situation where outsourcing projects could
come from India or life sciences projects
from China. And credible competition can
come from Chengdu, Croatia or Chennai.
Similarly, with foreign investment no longer
the preserve of the big corporate players, it
is harder to identify and target companies
It is no longer sufficient to simply choose
a few target industries and bombard
companies with marketing materials
extolling local virtues and views. Investment
promotion must be smarter.
Sound place marketing revolves around
marrying a location’s assets and capabilities
with market demand.
To identify market segments for investment,
attract firms and target the right investors, an
investment agency needs to fully understand
it’s local advantages for potential investors,
through the eyes of those investors, and be
able to convey this to decision-makers in a
way that makes bottom-line sense.
Although this sounds simple, there are a
number of mistakes commonly made in
location marketing. We were recently asked
to identify the 10 most common mistakes
and it is surprising how many of these have
However, according to the recent Institute
of Directors survey of company directors in
August of this year, Directors claimed that
they were not aware of the Uk Regional
Development Agencies (RDAs) and were
confused as to what RDAs can do for
them.
This goes against our experience with bigname international investors but it would be
true to say that less well-known companies
have been overlooked. In some areas this is
because attention is focussed on attracting
new investors at the expense of current
investors.
Regions cannot afford to ignore existing
companies. Our own research has proven
that, depending on the area, between 11%
and 16% of jobs in the UK are created by
foreign investors. Investors may only hold
2-3% of business sites but they have a
disproportionate impact on employment
levels.
If a region wants to create jobs, it needs
to look closer to home to deliver these.
The government’s own figures show that
expansion projects have been responsible
for over 50% of new investment in the UK.
In 2004/05 expansion projects accounted
for almost 40% of investment projects
handled by UK agencies (excluding M&A
and JVs). Critically, over 50% of new jobs
were created through expansions and over
Code?•••••••••••
100,000 jobs were created, retained or
associated with expansion projects.
Trying to be everything to all people.
As the saying goes, you can fool some of
the people some of the time but investors
will see through it. Agencies that oversell
often loose the sale. A few firms does
not a cluster make and selecting a few
markets where you have niche advantages
is likely to be more successful than catchall strategies where attempts are made
to attract anything and everything. It will
cost you your focus and make it harder to
identify investment prospects.
This is not to say that you shouldn’t be
aspirational. Both Wales and Glasgow have
been successful in developing a reputation
as centres for industries where they initially
had little real capability.
Mistaking local features for
advantages.
An investor wants to know how local assets
fit with business needs and translate into
profitability. You have to make it clear
how local features such as airports,
trains or students translate into bottomline advantages for the firm. A ‘vibrant
community’ means nothing but ‘high
levels of students and graduates’ means
a sustainable, potentially cost-competitive
workforce. However, even this is not
enough. The link between graduates or
other attributes and business performance
needs to be spelled out, not inferred.
Failing to see your location from the
investor’s perspective.
This means taking a pragmatic look at
your location and evaluating it according
to a company’s goals and the market in
which it operates. For example, you may
believe that your local road service is
adequate but if the investor needs to convey
containerised loads of car components,
the local infrastructure may not be good
enough.
Assuming good is good enough.
Although you might be competitive, you
might not be as competitive as you think,
and your competitiveness may have slipped.
Having an objective view of your location’s
comparative strengths and weakness is
important. For this reason benchmarking
against competitor and comparator
locations is often undertaken.
Not talking the talk.
An ability to ‘speak the language of the
boardroom’ can be an advantage. It is easier
to get a fix on the qualitative advantages of
your location and business cases tend to
focus on these at the expense of the cost
story. Qualitative factors are important and
for investments in services, research and
other value-led activities it can be key.
However, all businesses are in the business
of making money and have to operate on a
profitable basis.
For this reason, an ability to convey or
at least understand the cost implications
or the ‘bottom line’ story of a location is
important. Even if a location is high cost,
this is not to say it is not a profitable
business destination. Having the ability
to understand and convey the financial
attributes of your location will increase the
sophistication of your business case and
will help you engage in a more credible
manner with an investor.
Assuming firms share your social
agendas.
Many projects have been lost because
an agency tried to shoe-horn an investor
into a priority regeneration area or an high
unemployment area. Although RDAs exist
inter alia to improve social conditions via
economic growth, trying to directly connect
this to business attraction is doomed to
fail. And throwing in incentives will only
provide short-term fix with no guarantee of
company loyalty.
Confusing your market.
It is critical that any marketing strategy
is directed towards the end-user and
not towards corporate or political goals.
Agencies often face political pressure
to triumph organisational or political
achievements in marketing material but
companies simply do not care. Similarly,
generic marketing and generic marketing
channels will not reach decision-makers.
Getting the right message to the right client
at the right time is extremely difficult and it
is here that many agencies waste resources
and ultimately fail in their marketing efforts.
Hitting them with everything.
Good enquiry handling is crucial but too
many agencies simply do not provide
the information that they were asked for
by the client. ‘Padding’ responses with
related, or unrelated information, does not
enhance the business case but can actually
weaken a submission. Short, targeted
responses that are solutions-oriented rather
than informational are preferred. In our
experience, short submissions that ‘hit the
mark’ are given more attention by time-poor
investors.
Standing still.
One of the most important element in any
inward investment strategy is the continuous
pursuit and development of organisational
and staff excellence. Investment attraction is
essentially about relationship development.
Agencies need to be able to the instil
confidence in investors that they can deliver
a good business climate and supply the
support investors need in order to grow. For
this reason, developing staff and employing
people with commercial credibility is critical.
Having staff that understand the business
and industry of an investor can win or
loose an investment. As is an ability to
communicate this understanding to the
client.
Ignoring the B2B factor.
Companies are more savvy and confident
when it comes to investing and often
by-pass investment agencies completely.
Especially in the UK, where our open market
makes it easy for companies to invest.
While our openness makes us an attractive
location for investors, it also reduces a
company’s reliance on Government to
make their project happen. A company is
more likely to turn to financial, legal and
property advisers than to public agencies
for advice and assistance. Agencies are
often finding themselves out of the loop
and unable to put the case forward for
their location. Intermediary strategies are
becoming more important and having deep
as well as wide networks is increasingly for
identifying project leads.
For more information about the
services provided by DTZ,
please contact:
Kirstyn Boyle, International Location
Strategies, DTZ Consulting.
Contact: kirstyn.boyle@dtz.com