* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Download Competition for Investment: Best Practice in Investor Targeting
Private equity in the 1980s wikipedia , lookup
Private equity in the 2000s wikipedia , lookup
Startup company wikipedia , lookup
Private money investing wikipedia , lookup
Venture capital financing wikipedia , lookup
Corporate venture capital wikipedia , lookup
Socially responsible investing wikipedia , lookup
Investment management wikipedia , lookup
Investor-state dispute settlement wikipedia , lookup
History of investment banking in the United States wikipedia , lookup
Foreign direct investment in Iran wikipedia , lookup
Investment banking wikipedia , lookup
International investment agreement wikipedia , lookup
Early history of private equity wikipedia , lookup
Environmental, social and corporate governance wikipedia , lookup
Competition for Investment: Best Practice in Investor Targeting Paper by Dr. Henry Loewendahl APEC-OECD Seminar, 14-15 November 2005 (Busan, Korea) Executive summary About this paper § This is the accompanying paper to a presentation to be made at the APEC-OECD Seminar ‘Working Together on Investment for Development’ (14-15 November 2005; Busan, Korea). The paper is for the session ‘Competition for Investment: Does Industry Targeting Work’. The objective of the paper is to share the author’s practical experience in attracting foreign direct investment (FDI) to provide insight and best practice lessons for lead generation. The paper argues that investment promotion agencies (IPAs) need to incorporate private sector sales principles and organisation to effectively compete for FDI. About the author • Henry Loewendahl is a Director in OCO Consulting (UK) Ltd. Henry has a published PhD, which examined Japanese and German FDI strategies. His professional career began in corporate strategy in PricewaterhouseCoopers London. He then joined IBM-Plant Location International Brussels, before joining OCO Consulting in 2003. Henry has worked with IPAs in over 25 countries, and is currently leading assignments for the UK and Irish governments. Henry has a strong interest in Asia, and opened a Shanghai office in 2005 to provide lead generation in China. About OCO Consulting • OCO Consulting spun-out of PricewaterhouseCoopers in 2001 and has rapidly grown into one the largest specialist FDI consultancies, with a client base that includes over 200 MNCs and IPAs in over 50 countries. Key clients include Enterprise Ireland, Enterprise Florida, Forfas, Invest Italy, ISA, UKTI, UNCTAD, WDA and the World Bank. Services include: • Investor prospecting – provision of European and Chinese lead generation services whereby identify target companies, and generate investment leads and contestable projects in close coordination with our clients. • Benchmarking and proposition marketing – location benchmarking, proposition marketing and organisation development services and unique sales tools for location positioning and case-making. • LOCOmonitor™ - the leading global FDI project database (www.locomonitor.com), for investor targeting, FDI strategies and performance monitoring. 16,000 companies with FDI projects have been identified. www.ococonsulting.com 2 www.locomonitor.com Industry targeting Industry targeting to attract footloose FDI § § 19th At the end of the Century, the famous economist Thomas Jefferson stated that: ‘Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gain’ • • • Jefferson emphasises the footloose nature of MNCs. It is this mobility of investment that provides the possibility to influence the location decision of MNCs. Demand side factors (Market opportunities) Companies have imperfect information and decisions are influenced by perceptions. Through direct marketing, information can be provided to companies on the profitable business opportunities in a location, and encourage an investor to consider investment. Competitive environment Supply side factors (Location attributes) With a universe of millions of companies, it is essential to focus on companies operating in sectors with the best and most realistic investment potential for a given location. • To help do this, a practical framework for investment promotion strategy is shown on the right. www.ococonsulting.com Target sectors/ location alignment Product development To market to every company that may invest overseas would require a massive resource – and would be an incredible waste of money and effort. Marketing resources have to be focused on companies with the highest potential for investment in a given location. • Industries should be targeted: (1) which offer the largest market opportunities in terms of volume of FDI projects; (2) where the location can fulfil the location requirements of the sector; and (3) where the location can fulfil these requirements better than competing locations. Investment promotion strategy framework Sales and marketing strategy Source: OCO Consulting § 3 Target sectors (and business functions e.g. call centres) should also meet the economic development objectives of the location. The key benefits of inward investment are shown in the box on the next page. The benefits desired will also determine the type of FDI projects targeted (e.g. an automotive manufacturing investment will have a qualitatively different economic impact than an automotive R&D investment). www.locomonitor.com Industry targeting The key benefits of FDI Ø Technology: MNCs are more R&D intensive, and control much of global R&D and patenting. Ø Innovation: FDI can intensify local market competition, creating the stimulus for innovation. Ø Increased domestic investment: It is estimated $1 FDI leads to $1 domestic investment. Microsoft Europe estimates its ratio to be 1:10. Ø Export market access: FDI is more export intensive than domestic investment and can lead to local company exports. Ø Foreign exchange: FDI can be a key source of foreign exchange in countries with low savings or access to capital. Ø Wage premium: Foreign owned companies pay higher wages – a key objective of attracting inward investment. Ø Job creation: FDI creates direct jobs. It also creates indirect jobs. Anecdotal evidence suggests 1 manufacturing FDI job creates 3 indirect jobs. Microsoft Europe ratio is est. 1:30. Ø Higher productivity: Productivity in FDI is higher than domestic firms, often by up to 40%. Multinationality is the key reason - outward FDI also raises domestic productivity. Ø Distributional objectives: Inward investment can act as a catalyst for growth in poorer regions – as long as they have adequate absorptive capacity. Ø Cluster targeting Catalyst role: FDI can act as a powerful catalyst for followthe leader investment, supply chain development, cluster development, and raising the brand value of a location. Towards the end of the 20th Century, Michael Porter argued ‘Paradoxically, the enduring competitive advantages in a global economy lie increasingly in local things – knowledge, relationships, and motivation that distant rivals cannot match…’. § In the early 21st Century the European Commission stated:‘It is the capacity to innovate which helps regions to achieve an advantageous position in key industrial sectors or clusters’. § MNCs invest overseas not only to exploit profitable opportunities (new markets, resources or lower costs) but also to access tacit benefits, such as knowledge and relationships, which cannot be found anywhere else. As Markusen wonderfully puts it ‘globalization may lead to sticky places within slippery space.’ § While industry targeting is essential to focus on the best FDI prospects, a cluster-based approach is increasingly needed to attract knowledge-based investment.* § The investment ‘proposition’ marketed to investors for knowledge-based investment are business solutions based on technology and innovation capacity relevant for investors in specific industries. See www.waipa.org/works_programme1.htm Source: OCO Consulting www.ococonsulting.com § 4 www.locomonitor.com Investor targeting Why engage in investor targeting? Most successful methods § Investor targeting is a technique to attract FDI in greater § quantity and quality. It is key to pro-active investment promotion. Most of the world’s leading agencies now target: Sectors, Types of company and Specific corporations. § Investment agencies are adopting private sector approaches to investor targeting. This involves segmenting the market and building networks with decision-makers in key target companies and brokers. The objective is to § generate good quality business leads and to secure projects. § § Investor targeting involves well researched and planned approaches to specific managers in the targeted companies about niche ‘business opportunities’ in the host country’. Results come by sustained approaches to selected companies often after several years. Focus effort on best prospects. § Can greatly increase investor and broker awareness. § Investors respond best to material relevant to them. § Can help develop ‘clusters’. § Cost effective – takes time more than money. § Can be outsourced to specialist providers. www.ococonsulting.com Directory listings and direct mail has proved to be the least effective methods of investor targeting. Method Aftercare services for target firms Links to target firms and netw orks Links to industry associations etc Direct mail to targeted brokers* Sales representatives PR companies Conferences, seminars Outw ard missions TV commercials Organisations in source country Conventions, exhibitions Trade press advertising Direct mail to targeted companies Inw ard missions Directory listings The major advantages of investor targeting are: § Experience demonstrates that the most successful methods of investor targeting involve links to existing investors and business and personal networks with target companies and intermediary organisations, including industry associations and investment multipliers like real estate companies and location consultants. Sales representation has also proven to be effective, as long as it is performance driven. % IPAs using m ethod 40% 60% 40% 50% 30% 30% 70% 50% 20% 20% 80% 50% 90% 40% 40% Av. rating for lead gen. (m ax score=5) 5.0 4.8 4.1 4.0 4.0 4.0 3.6 3.6 3.5 3.5 3.4 3.2 2.8 2.8 2.5 Source: survey of 10 leading IPAs *Used by over 60% of major investors 5 www.locomonitor.com Investor targeting Best practice principles Key success factors 1. Focus on a small number of sectors. 1. 2. Focus resources, time and effort on a small number of high quality prospects. Focus on multiple contacts in a smaller number of strategic companies. 2. Develop a one year marketing plan BEFORE engaging in company targeting activities. Develop a sales pipeline that can be reactivated and re-contacted. 3. Full preparation of project teams to ensure a consistent and coordinated approach. Manage the sales process strategically with a web-based CRM system. 4. Use trusted third parties for introductions and networking at the appropriate level. 5. Attend industry events and trade conferences. 6. Prepare for all meetings with business propositions and appropriate material. 7. Provide business advice to the investor based on understanding issues. 8. Conduct lead qualification early in terms of project scope. 9. Aim for a conversion rate of 20% on leads, prospects, and active cases. 10. Apply a time limit/cut-off point on follow-up and closure. 3. 4. 5. Prepare proposition-based marketing materials and business cases tailored to specific target audience. 6. Development of research tools and questionnaire templates to be used when meeting companies. 7. Well-planned approach to meetings and discussions with companies. 8. Post-meeting evaluation and immediate followup proposals to be made to companies. 9. Longer term follow-up and relationship building. 10. Pro-active targeting approach and relationship building through presence in the market. www.ococonsulting.com 6 www.locomonitor.com IPA sales best practice Inward investment is a sales business § § FDI promotion is a sales business. What we are selling are locationspecific investment propositions and products. We are selling to senior decision-makers in multinational companies and investment multipliers. The “numbers game” as it is commonly known is an expensive and inefficient way of developing FDI business. We recommend an approach which focuses resources at back office level in research and marketing prior to deploying senior level front line resources in sales, and makes maximum use of networks to identify known prospects. This ensures that sales resources are focused on fewer but better prospects. We call this approach “precision market targeting”. Managing the sales pipeline § Lead generation and conversion is the key objective of investment promotion. Leads are companies that have a confirmed interest to invest in the medium term in your region. Qualified leads are companies that plan to invest in your region in target sectors, and would like to meet. No of leads ‘As is’ No of leads As should be Input Time Source: OCO Consulting Source: OCO Consulting www.ococonsulting.com Leads Time 7 12 months lead generation contract 3000 target investors 600 investors prospected 120 leads 60 qualified leads & meetings 12 contestable projects 2-5 realised projects Source: OCO Consulting § Contestable projects are companies that have a current project, which your location may be considered for. § It is critical to reduce your list of target companies as quickly as possible to leads, qualified leads and contestable projects. OCO Consulting lead generation results typically show that a 20% rule can be applied (see the diagram above). IPA input Leads FDI sales metrics (the ’20%’ rule) www.locomonitor.com IPA sales best practice Market/sector Market/sector research research Lead generation Strategic positioning – develop the sales propositions Lead validation IPA SALES PROCESS Home Product 1 Regions A,B,C § The diagram on the left shows 8 key stages of the IPA sales process – from strategy, through to lead generation, propositions, and facilitation and implementation of the project. § Of particular importance is that there are 4 stages after leads have been identified and investors met in order to secure a realised project. § While every IPA organisation is likely to be different, the most successful IPAs organise their FDI sales process based on private sector best practice. § The diagram on the left shows that ‘Home’ is where the ‘product is made.’ Typically, regions in the country play a key role in developing and providing the product. As with the private sector, the best practice sales organisation centralises key sales functions in the HQ, so that sales reps in the market can focus all of their time on sales. § Very few IPAs have yet aligned their organisation to sales principles Investor targeting/lead generation Meeting prospects Introduce the proposition Proposals & business case Negotiations Facilitation and implementation Closure Source: OCO Consulting Best practice in IPA sales Investor development – the best propositions often come from investors Account Account management management Central sales functions Overseas Office 1 Products 2, 3 Account management Sales & marketing strategy Product 2 Regions B,C,F Product 3 Regions D, E,F Products and clusters Office 2 Products 3 Databases & systems Office 3 Products1& 3 Case management IPA SALES ORGANISATION Source: OCO Consulting www.ococonsulting.com Prospecting and follow up 8 www.locomonitor.com Case study: lead generation in China Project background Project results § UK Trade and Investment has achieved excellent results in China with nearly 400 Chinese companies established in the UK. UKTI has set itself ambitious targets – to increase the number of FDI projects it attracts from China by one-third from 2005 to 2007. § 600 target companies were identified. This was screened to a shortlist of 300 that were contacted. 120 of these companies were interviewed, leading to 20 hot leads, which met with UKTI to discuss their projects. § In 2005 UKTI appointed OCO Consulting to work with UKTI offices in China to fast-track their lead generation efforts by providing greater private sector focus and sales resource. § As the chart on the bottom left shows, lead generation requires a sustained approach – it took around 2 months before a significant number of hot leads were identifed. § The pie chart shows that business networks directly with companies are critical to successful lead generation. Networks with trade and sectoral associations, Government and the media are also essential. Attending exhibitions can also generate leads. § 1 target company identified established a biotech EHQ in Oxford during the assignment. Up to 5 investments are expected within the next 36 months. § UKTI will work closely with these companies to secure their investment. Within a month of identifying hot leads, the British Minister for Trade & Foreign Affairs went to Shanghai to have lunch with the companies and OCO– demonstrating the Governments’ committment. Project approach § The first stage in the project was to review UKTI’s marketing materials (product information) and agree target sectors and how the OCO and UKTI teams would work together in China. § Subsequently, OCO conducted market research and investor prospecting in four waves of 150 Chinese companies, focusing on the target sectors agreed (life sciences, ICT, automotive and creative). The assignment was completed in 4 months. Press and Journalists 10% Government 10% Research through personal business networks 32% Exhibitions 10% Leads from personal business networks 24% China trade and sectoral associations 14% www.ococonsulting.com 9 www.locomonitor.com Points of Contact OCO Consulting Ltd (Head office) 6 Citylink Business Park Durham St Belfast BT12 4HB Northern Ireland Mark O’Connell Managing Director T: +44 28 9024 1849 M: +44 77 7164 3633 F: +44 28 9024 2597 E: [email protected] OCO Consulting (International) Avenue Louise 149/24 1050 Brussels Belgium Henry Loewendahl Director, Consulting Services T: +44 28 9024 1849 M: +44 77 4870 1382 F: +44 28 9024 2597 E: [email protected] OCO Consulting (Asia) Citic Square 3540 Nanjing Xi Road 1168 200041 Shanghai, China Jianlan Yu Director, Asia-Pacific T: +86 21 51119108 (Shanghai) T: +32 2 5357577 (Brussels) F: +86 21 5252 4616 E: [email protected] www.ococonsulting.com OCO Software (Product development) 10 West Beach Cobh Cork, Republic of Ireland 10 www.locomonitor.com