Toromark Expansion Project Report
Topic: Analysis and Decision for Expansion Location Between Austin, Texas and Charlotte,
North Carolina
Name: Saheer Arefin
Date: 29/11/2022
Class: MGTA05H3
Professor: Arif Toor
Table of Contents
Executive Summary ............................................................................................................... 1
Introduction .......................................................................................................................... 1
Demography.......................................................................................................................... 2
Impact of Population on Economy and Market ............................................................................3
Limitations of Larger Population .................................................................................................4
Economy and GDP ................................................................................................................ 5
GDP Limitations ...........................................................................................................................7
Education .............................................................................................................................. 8
Technology Market .......................................................................................................................9
Taxes and Regulations........................................................................................................... 9
Transportation .................................................................................................................... 10
Final Remarks..................................................................................................................... 11
Executive Summary
Toromark is a Canadian e-commerce and web design venture that was founded 7 years
ago. Since then, the company has found mass success, but majority of the revenue streams from
only a handful of clients. For Toromark to maximize their revenue, they must attract as many
clients as possible. To do this, the corporation must expand by creating new branches in other
prospering cities; however, there are several variables to consider when choosing a city to branch
into. Some of these variables include quality of life for employees, distance from Toronto, and
economic activity. It is also important to note what areas the cities are deficient in which may be
an obstacle for the corporation. Through thorough analysis and vetting, the team at Toromark has
narrowed the list down to Austin, Texas, and Charlotte, North Carolina. Both cities share
similarities due to their location in southern US, however there are also key differences.
Introduction
When analyzing demographic, economic, and business-related data, it is difficult to form
a coherent argument for deciding between Austin, Texas, and Charlotte, North Carolina.
However, when looking deeper into certain statistics and investigating the intangibles that are not
portrayed in the numbers, it is evident that Austin has a slight edge over Charlotte in certain, key
categories. A few of these key categories include economic growth, market for e-commerce,
demography, and the talent pool for hiring. Although there are several positive aspects about
Austin, it also has flaws in areas where Charlotte otherwise excels; for example, Charlotte has
significantly more affordable housing than Austin. The pros and cons of Austin in comparison to
Charlotte will be discussed in depth throughout the entirety of the report.
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Demography
Demography plays a fundamental role when deciding which city to expand into. For
example, a city with an extremely small population such as Iowa City would inevitably have a
smaller e-commerce consulting market than that or larger cities. On the other hand, there are also
downsides to urban cities such as New York; these metropolis cities have a vast and diverse
market, however, there is mass pollution and a lack of affordable housing. It is paramount that
the chosen city consists of a balance such that it not only has a sizeable population but also
maintains good living conditions for its inhabitants. The city should also have positive
population growth as Toromark is looking to operate in the long run. After looking at the
population data for Austin, it is clear that it meets all the criteria mentioned above. A graph can
be derived from the world population data to analyze the population growth across the years.
Population for Austin, Texas Across the Years
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Austin, Texas, currently has a population of 996,147 people. From the graph shown on
the previous page, it is noticeable that Austin’s population has exponentially grown since the
1980’s and it is continuing that trend. When comparing the population statistics from Austin to
Charlotte, some crucial differences can be discovered. Charlotte, North Carolina, currently has a
population of 879,709. Austin having a larger population size than Charlotte is notable as a
higher population has a greater positive impact on private businesses and the overall state of the
economy.
Impact of Population on Economy and Market
A growing population can stimulate investment in the economy. Because of the
increasing costs associated with maintaining a growing population, an economy's investment
potential grows as the population does. It is essential to realise that as the population increases,
the domestic market expands and becomes more diverse as a result of the overall higher
consumer influx and demand. A bigger market is desirable as it not only ensures the confidence
of the businesses currently in the market, but it also encourages other people to try and enter the
market as well. People are motivated by the fact that broader markets typically tend to have more
potential for profits and success from a business owner perspective.
At the same time, a substantial population can also increase the economy's base of
production. Since factors of production such as human labour expands as the population grows,
business can have large-scale production and lower costs, hence achieving economies of scale.
Consumers benefit from companies reaching economies of scale as more production leads to
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lower prices. With the overall increase in human labour, the talent pool rises as well;
subsequently, Toromark will find more success hiring employees in Austin rather than Charlotte.
Limitations of Larger Population
It is evident that the larger population of Austin Texas, is an asset that can benefit
Toromark in numerous facets. Nevertheless, it is imperative that we understand the limitations
that also come with a larger population. For example, an increase in population can lead to a
decrease in per capita income. This is because population also shares a proportional relationship
with the unemployment rate as there as more people competing for jobs. This can be seen
through several developing countries such as Bangladesh and Ethiopia where there is an
extremely dense population which causes there to be an imbalance in the people who are looking
for work and the number of positions available. These countries also tend to have more
expensive housing as there is once again a shortcoming between the number of houses available
and the number of people looking to buy houses.
Both unemployment rates and house prices factor into the way consumers behave, and
the confidence in the state of the economy and the market. If a consumer notices an increase in
house prices coupled with high unemployment rates, they will be less inclined to spend their
money and business will have to cut back on their production output as a result. This can at its
worst case, lead the economy into a recession. Although there are limitations to having a larger
population, it is important to remark that these limitations are not guaranteed or applicable in all
scenarios which will be discussed later. Overall, the pros of having a greater population
drastically outweigh the cons.
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Economy and GDP
When deciding which city is better to expand into from a business standpoint, the overall
economy of each city is extremely relevant. When assessing the economic productivity of a city
or country, the first place to look towards is the nominal GDP which is a standard measure of the
total productivity in a society. Nominal GDP accounts for the current monetary value of all
goods and services, however, this is not the most accurate reading of a cities production as it
does not adjust for inflation. A more efficient way of evaluating a city’s economy would be
analyzing the real GDP which measures the monetary value of all goods and services produced
in a certain period. The real GDP of Austin and Charlotte would portray which city has the
healthier economy; this plays a huge part in deciding which city has more economic potential.
From the real GDP data for Austin, Texas, obtained from the St Louis Fed, a graph can be
obtained which would display not only the current real GDP, but also its growth over the years.
Real GDP for Austin, Texas Across the Years
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The current real GDP of Austin, Texas is 148.8 billion dollars. From the real GDP graph
shown on the graph from the previous page, it is visible that the real GDP has been consistently
increasing for long period of time. The positive real GDP growth rate indicates that not only is
the economy sustainable and healthy but is also expanding. A growing economy means that
business, jobs, and personal income is annually increasing all together. However, a negative
GDP rate means the economy is heading into a recession. Knowing this information, businesses
might lay off people or initiate pay freezes. The current growth rate of the real GDP for Austin is
4.3% which is the second highest growth rate in the US, while Charlotte has a growth rate of
2.5% which ranks eight highest. Austin having nearly double the growth rate of Charlotte shows
that the economy is booming and that it is the perfect time to get financially active. The healthy
real GDP of Austin is an excellent indicator for Toromark that Austin is more suited for running
a business than Charlotte.
Charlotte has a real GDP of 110 billion dollars. There is a sizeable difference between the
real GDP of both Austin and Charlotte as Austin’s real GDP is almost 30 billion dollars higher.
The real GDP accurately measures the productivity of a city. however, it is not a valid
representation of the quality of life. For example, if a densely populated city such as New York
hypothetically had a GDP of 160 billion, this would not mean that New York’s economy is
healthier than Austin’s. In this specific scenario, New York’s GDP is not created out of efficient
productivity, but instead because of their immense population. Therefore, when measuring the
quality of life from a financial standpoint, it is better to interpret the real GDP per capita data. In
2019, Austin, Texas had a real GDP per capita of 63,839, whereas Charlotte’s was 58,064. The
concept where more populated areas usually tend have less income per capita was mentioned
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earlier on in the report. It was also mentioned that the notion is not applicable to all areas and
Austin is a great example of that Austin’s high real GDP per capita suggests that their healthy
economy is not a result of their mass population, but instead the outcome of efficient use of
factors or production and resources.
GDP Limitations
When analyzing the real GDP per capita and the real GDP growth rate it is important to
note that there are significant limitations. The real GDP per capita is the best way to evaluate the
quality of life from a financial perspective but that does not correlate to it being an efficient
method. Countries in North America have a very high GDP per capita, but these number can
easily be skewed. There are countries where a miniscule percentage of people own a majority of
the domestic wealth. In these countries, there is vast wealth inequality where the GDP per capita
number will be substantially large; the number is not a result of everyone’s combined
contribution to the economy but because of the mass wealth owned by the top earners.
The real GDP growth rate data suggests that Austin’s economy is growing at nearly twice
the rate of Charlotte’s. This information alone is reason enough to argue why Austin is a more
viable location for a business than Charlotte, however, there are once again intangibles that the
numbers don’t show. The business cycle shows that an economy will always flip back and forth
between a recession and an expansion. When companies reach high levels of recession, it is a
sign that there will be an expansion the future. Likewise, if and economy is booming, it may be a
sign that there will be a recession soon. Therefore, the remarkable economic growth of Austin,
may be a sign that there will be a recession soon and it may not be a good time open a business.
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Education
Education plays a prominent role when deciding which city is a better option for multiple
reasons. Since current employees at Toromark will be relocating their families to the new city, it
is important to them that their current or future children receive good education. The standard of
education is not only imperative for personal reasons to the employees, but also from a business
standpoint. Areas that have better levels of education accordingly have more skilled employees
and there is hence a higher quality of human labour. When considering a location for a business,
companies analyze the number of relevant factors of production in the given area. This includes,
capital resources, land resources, human labour, and entrepreneurship. Since Toromark is an
e-commerce consulting company, they do not need a lot of money to operate the actual business;
instead, they require skilled employees that have a solid education background and interpersonal
skills.
Austin has thirteen universities while Charlotte only has six universities. Among the
thirteen universities at Austin, two of them are among the top fifty universities out of the 443
universities in the US. Austin’s sublime education results in their being a high talent pool for
Toromark to choose from when hiring new employees. The higher standard of education is
showcased in statistics as well. In August 2022, Charlotte had an unemployment rate of 3.7%
whereas Austin had a rate of 2.7%. It makes sense for there to be less unemployment in areas
where workers are more skilled, have better education, and are more adept. A study from
nextburb states that 38% of people in Austin have a bachelor’s degree compared to the 29% in
Charlotte, and 23%% of people in Austin have a master’s degree in contrast to the 16% at
Charlotte. Austin is recognized across the US for having such a well-educated population and
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they are second only to Seattle. These statistics solidify that Toromark would fine more success
in their faculty by hiring people from Austin rather than Charlotte.
Technology Market
Since Toromark is a tech-based company, it makes sense to analyze the technology
related opportunities in Austin in comparison with Charlotte. Austin is known in the US for
having a massive technology scene. Several Fortune 500 companies operate in Austin because of
its vast technology market. The only Apple campus outside Cupertino, one of IBM’s flagship
campuses, Amazon, and Google are all located in Austin. A big factor for the huge tech industry
in Austin is the well-educated work industry which is a big draw for bigger companies and is a
huge influence for Toromark. On top of that, there is a lot of venture capital money being
funneled into Austin which is a type of financing that investors provide for business start-ups.
Taxes and Regulations
One of the biggest hassles towards businesses tends to be taxes and regulations.
Corporations are always trying to find methods to avoid taxes because of how immense they tend
to be, especially in the US. However, Austin is perfect for business as they have very minimal
taxes. Austin has an 8.25% sales tax, a 0.375% corporate tax for retail and wholesale business, a
0.75% corporate tax for all other business, and a 0% individual income tax. When comparing the
tax rates of Austin to Charlotte, major differences can be discovered. Charlotte has a 7.25% sales
tax, a 0% corporate tax, and a 5% income tax. Austin noticeably has a 1% sales tax, for
Toromark’s case, a 0.75% higher corporate tax, and a 5% lesser income tax. Overall, Charlotte’s
has higher taxes due to the 5% income tax which is not ideal for starting up a business. Higher
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taxes not only go against Toromark’s motives, but also proves to be a detriment for each,
individual employee. There are ways to manually lower corporate taxes such as getting charity
tax credit, but that would be an excess cost which isn’t needed in low tax areas like Austin.
Both Austin and Charlotte have relatively low regulations when starting up a business.
There are no licenses required to start up a business per se in both cities, however, there are
several regulatory agencies that have licensing and permitting requirements based on the type or
service. However, the nature of the service that Toromark is providing, that being web design
and e-commerce consulting, there are not a lot of permits or licenses required. Majority of the
regulations in Austin and Charlotte relate to food industries or construction. From a regulation
point of view, both cities are promising and have little to no issues.
Transportation
When comparing the potential of two cities, it is pertinent to analyze the transportation
system and the cost that comes along with it. Being an extremely small city, people mainly use
buses and light rail to commute from one place to another. As a result, transportation is made
cheap at $41.25 for a monthly transportation ticket and $1.25 for a single transportation ticket.
From a financial perspective the transportation system for Austin is perfect as it is efficient,
cheap, easily accessible, and most of all, there is no need to spend money on a car or gas. On the
contrary, Charlotte is quite the opposite. It is rated the least walkable of the fifty biggest cities in
the US. Due to everyone using cars and public transportation not being in as much demand,
prices are high at monthly transportation ticket costing $80 and a single ticket costing $2.20.
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It is evident that when discussing transportation within the city, Austin is significantly
more efficient and cheaper due to smaller size of the city. However, it is important to note that
Austin is a 24 hour drive away from Toronto whereas Charlotte is only a 12 hour drive. This is a
striking difference as employees will have to commute double the time if they choose to go to
Austin. Nevertheless, employees will not be traveling often between Austin and Charlotte and
there is not as big of a time difference as Toronto is in the Eastern time zone whereas Austin is in
the Central time zone.
Final Remarks
After thoroughly investigating both Austin and Charlotte to determine which city
Toromark should expand into it is evident that Austin is the better suited city. Both cities have its
pros and cons, but Austin possess certain key advantages over Charlotte. These components
include having a: larger population, higher real GDP, higher GDP growth rate, higher GDP per
capita, lower taxes overall, more educated workforce, bigger talent pool, better tech industry,
better transportation system, lower unemployment rate. The only aspects that Charlotte were
better than Austin in is having significantly more affordable housing and being closer to Toronto.
For some people cheaper housing may be enough to choose Charlotte, however, when evaluating
both cities objectively from the lens of a business owner, there is no question that Austin is the
better city to create a new location in.
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Works Cited
Recruitment/Business Investment Grant. City of Charlotte Government. (n.d.). Retrieved
November 29, 2022, from https://charlottenc.gov/ED/Recruitment/Pages/default.aspx
Economic Development Department. Economic Development | AustinTexas.gov. (2022,
November 22). Retrieved November 29, 2022, from
https://www.austintexas.gov/department/economic-development
Federal Reserve Bank of St. Louis. (n.d.). Federal Reserve Economic Data: Fred: St. louis fed.
FRED. Retrieved November 29, 2022, from https://fred.stlouisfed.org/
Austin Economic Indicators, October 2022. Federal Reserve Bank of Dallas. (n.d.). Retrieved
November 29, 2022, from
https://www.dallasfed.org/research/indicators/aus/2022/aus2210.aspx
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