FDI Marketing

TOOLS TO MARKET YOUR CITY’S COMPETITIVE EDGE MARKETING FOR FOREIGN DIRECT INVESTMENT THE CHALLENGE Many cities and regions in the world want to attract new external investors to create jobs and bring new know-how and technologies into their economy. There is great competition and only those communities that create a competitive product and market it actively will succeed.

WHAT IS MUNICIPAL MARKETING AND FDI ATTRACTION?
WHAT ARE THE BENEFITS OF FDI MARKETING? 
HOW TO CREATE LOCAL CONDITIONS FOR FDI? 
WEB RESOURSES 
APPENDIX 1 General content of FDI promotion fact sheets

WHAT IS MUNICIPAL MARKETING AND FDI ATTRACTION?

Municipal Marketing
Municipal marketing as a part / sub-issue of territorial marketing emerged in the   1980s and 1990s. Territorial marketing and its variants are based on principles similar to strategic planning for development of cities and regions. The focus of municipal marketing is on effective communication between municipality that has an assets and products on the “supply” side and the prospective external investor, who represents the “demand side” for the cities’ products.   Such communication can only take place through active stimulation and support for cooperation between the public and private sectors of the municipality, orientation on the needs of “customers” from the demand side, creation of a brand and identity for the territory, and positive expectations and an active pro-market approach to local and regional (economic) development.

There are many types and variants of municipal marketing, which have appeared in different cities and countries. A reason for the variety of approaches is that they depend on the problems and needs of individual cities and on how individual municipal governments address those problems and needs. The basic feature of each municipal marketing approach is the understanding that each of the city’s potential assets must be strategically developed as a specific product that is competitive with the alternative products of other cities, and that can be placed or sold on the market.

The main goals of any municipal marketing approach can be characterized by:

1. Increased attractiveness of the city for a number of different target groups that will demand the city’s products
2. Increase of economic potential of the city
3. Improved external and internal image of the city
4. Increase of the intensity by which citizens and businesses identify with the city’s needs and goals,  and
5. Optimized city government in order to increase effective use of available resources 

With the above fundamentals in place, typical areas of municipal marketing include increasing the quality of the following potential “assets” and then marketing them as desirable products that the city offers:

1. FDI marketing (support of investments and job creation)
2. Trade development
3. Housing
4. Transportation
5. Education and Labor market
6. Environment
7. Culture, sports and leisure-time infrastructure
8. Destination management
9. Revitalization and increased attractiveness of city center (real estate development)

What is FDI Attraction?
Attracting FDI has become a central component of industrial policy in developed and developing countries across the world. There is a large volume of literature identifying why firms engage in international investment, the economic and political determinants of investment location and the impact of foreign direct investment on economic development. Most countries, and many regions and cities within countries, have established investment promotion units with the specific objective of attracting inward investment. In this paragraph, we provide: an analysis of investment promotion; a framework that cities / regions can use to improve their effectiveness in attracting foreign direct investment; and suggestions for maximizing the benefits of FDI for local economies. Based on recent experience, it is argued that the most successful investment promoters have developed an integrated investment promotion strategy that combines marketing and company targeting with after-care and product development. 

There is a common view that FDI helps accelerate the process of economic development in host countries. Optimism about the economic consequences of foreign investment, coupled with heightened awareness about the importance of new technologies for economic growth, has contributed to wide-reaching changes in national policies on FDI. It is very difficult (almost impossible) to develop a regional / municipal investment attraction strategy without an overall business / investment friendly policy of the national government. During the last two decades, many emerging economies have dramatically reduced barriers to FDI, and countries at all levels of development have created a policy infrastructure to attract multinational firms. Standard tactics to promote FDI include the extension of tax holidays, exemptions from import duties, and the offer of direct subsidies. This is the framework under which we can focus on direct marketing and promotion of individual regions and cities.

As with any business decision, the decision of an investor to choose a specific location is based on a combination of both subjective and objective criteria. For example, who is to say whether a brochure is good or excellent, or whether the web site is attractive for investors? Who can really tell if the development strategy will work? That is why a single scientifically proven solution for cities and regions does not exist for attracting FDI.  There are however, certain minimum requirements for any positive FDI accomplishment, and these are discussed below.

Image, brand awareness, and perceptions of the territory are major factors influencing the location or foreign direct investment (FDI). Companies make investment location decisions on the basis of their information pool and their understanding of what a location “offers” the investment. Investment promotion is therefore an essential component of attracting inward investment, and there has been a rapid growth in the number of cities and regions actively involved in this “game” across the world, thus making the entire environment very competitive.

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WHAT ARE THE BENEFITS OF FDI MARKETING?

If the market were perfect, companies and corporations would be able to evaluate all conditions of doing business around the world and calculate the best place for location of their production / service facilities. In that case, investment promotion by local governments would be unnecessary. However, a transnational corporation’s information base about locations is never perfect, and so a company’s decision-making process must be subjective and biased. It is often a bureaucratic process, which may be affected by the company’s perception of its competition (where it must be located to block or neutralize its competition) or of the risk it is willing to take (is the potential market so important that the company will take risks it would usually not take), or even by rivalry among the company’s subsidiaries, who would vie for more company investment in locations closer to them.  The implication of this is that most companies consider only a small range of potential investment locations. Many countries or regions are not even on their map.  

This phenomenon in part provides an explanation for the follow the-leader pattern and “bunching” in FDI that has been observed for many years. Companies acquire information primarily via learning-by-doing, demonstrating the importance of comfort factors, such as the FDI track record of a host country, in determining investment location. Often a “flagship investment” by a major company increases the information and reduces the risk for other TNCs (this is exactly the case of Japanese automotive investment in Europe).

Because of these factors, countries and territories that understand that international companies operate in the context of imperfect information and bureaucratic-based assumptions know that they must spend resources to promote themselves and to counter some of the deficiencies of perception that transnational companies experience when they seek foreign locations. That is the reason that potential host territories spent four times more last year on location promotion than they did in recent preceding years. Specifically, investment promotion was most effective when potential host territories used it to provide better information and to undo misconceptions, and to help overcome the reluctance of parent companies to consider new production sites by demonstrating unique advantages that the relevant host territory may offer for targeted activities.

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HOW TO CREATE LOCAL CONDITIONS FOR FDI?

It is obvious that different investors may have different needs concerning quality and availability of local work force, transportation access, size and quality of real estate, etc. However, there are basic principles which should be used in every city so that the city organizes itself to be more attractive for FDI. The most important tasks include:

1. FDI team establishment

If the city (region) wants to play an active role in FDI attraction, there must be structures responsible for LED and FDI, and individuals responsible for their activities must be identified and empowered. The establishment of an FDI/LED team requires the following:

• Create personnel and organizational structure of local FDI task force (FDITF)
• Guarantee financing from municipal / regional / state budget
• Adopt a firm FDITF working schedule and standard operating procedures
• Identify FDITF key partners both in public and private sector
• Create an FDI one-stop-shop (information and support under one roof)

More about this topic can be found in the “Local Economic Development department” toolkit.

2. FDI strategy development 

Investors may come to the city by accident; however, each city should still identify its strengths and agree on what kind of investors it considers appropriate for the city’s needs and for its future. Only in that way can the city determine the kind of target investors on which it should spend its promotion resources. Answering these issues will produce an FDI strategy. The strategy calls for careful analysis, consisting of the following: 

• Community profile compilation (FDI – oriented data file)
• SWOT analysis, benchmarking,  competitive analysis
• City positioning (what are a city’s best opportunities in the market)
• A portfolio of development properties
• The selection of a product that the city can offer in terms of property, business climate, workforce and incentives.  

3. Product development – preparation of property for investors

Each city is better positioned on the market if it does not offer just available land for business but a comprehensive product consisting of:

• zoning (design of spatial usage)
• ownership issues (monitoring and land assembly)
• barriers and burdens (contamination, green belts etc.)
• monitoring of technical infrastructure condition
• management of product development
• comprehensive (both technical and economic) development plan
• investors’ localization principles, local incentives

More about this topic can be found in the “Property preparation toolkit”.

4. FDI marketing development

Once the product is ready it is necessary to start with active marketing. The competition is very strong and the investors get used to receiving all kinds of information promoting individual destinations. FDI product marketing includes among others:

• marketing plan and targeting (selection of target sectors)
• general PR campaign
• participation at investment opportunity fairs, conferences, investment missions
• direct mail campaign, telephone campaign
• promotion material of the product, brochure, CD
• data sheets, presentation slides
• presentation room (selection, equipment)
• website
• aftercare plan (maintaining the relations with established investors, creating opportunities for expansion)
• marketing skills of LED team / experts

It should be added that the actions above can be carried out neither separately nor in simple linear consequence as there are many inner linkages. Thus, the city has to offer a package of promotion materials by selecting the materials that in combination provide affordable and efficient mix of information and services.

How to do FDI Marketing?
Successful investment promotion requires clear strategic direction and effective marketing. As the first step of FDI marketing the city / region should prepare a marketing plan that explicitly targets a number of investor types or sectors based on an analysis of the City to meet their needs. The analysis that underpins strategy and marketing is described as competitive positioning. Competitive positioning is an analysis of positives and negatives (competitive advantages) of specific location against its competitors. Competitive positioning is an important activity for all new investment promotion campaigns, and it is therefore relevant for all cities / regions who want to attract FDI. It is a complex process and requires:

• Detailed knowledge of industry you want to develop in the city, sectors and trends, general FDI trends, cluster development in the region, company strategy, typical project requirements and parameters and best-practice activities.
• Up-to-date, fact-based comparative research providing hard data to support image-building and investment propositions made to companies; and
• A reflective analysis of the location

The Marketing Plan should contain the following elements:

1. Review of competitive position of the city relative to other regions of Ukraine

An analysis of a location’s strengths, weaknesses, opportunities and threats (SWOT) relative to each industry sector’s requirements and key competitors for inward investment in each of these sectors. Competitive position represents the strength of the location against competing locations for each sector of interest (textile, food industry, machinery…). It is important to identify sectors in which the host city as an existing competitive strength, or one that can be realistically developed.

Based on the above analysis, key propositions (often called unique selling points or USPs) are developed for key sectors and specific types of projects. The aim is to define a location’s offer and provide project officers with competitive arguments to use when approaching potential investors. A competitive positioning exercise should therefore provide at the strategic level a detailed understanding of a location’s position relative to competitors and different sectors, and at the project level information allowing project officers to promote effectively their areas as a location for inward investment and to handle investor enquiries.

2. Target investment types/sectors selected with rationale for selection made

Investment promotion agencies are moving towards a sector-based targeted investment strategy in order to attract investment most effectively and to prioritize limited resources to where they are the most useful and to where the probability of winning projects is the highest. Sector targeting should identify sectors in which the host country / region /city is best placed to attract investment and which meet inward investment objectives. The aim is to identify sectors that meet investment objectives. The evaluation comes out of the analysis and region’s / city’s competitive position and identifies sectors according to:

• FDI opportunities - sectors with the best potential for mobile projects. The key aim is to identify sectors that are growing and internationally mobile; and
• Degree to which the sector of the industry meets FDI objectives - extent to which the sector meets the overall objectives in attracting FDI. Currently the leading countries / regions are focusing not only on job creation, but are also prioritizing sectors and activities that will need skilled labor, domestic research and development capability, and will help to build networks among innovative firms;
• Attracting FDI that takes into account and capitalizes on the strengths of indigenous industry, in order to generate the most benefits from FDI and embed foreign investors in the local economy;
• Furthermore, the most advanced regions / cities / metropolitan areas focus business activities within their target sectors and sub-sectors to complete and upgrade value-adding chains and develop advanced clusters of foreign investors and local firms that work together.

Examples of innovative approaches to selecting the appropriate target investor might be:

In the automotive industry, focusing on R&D and headquarters activities. By attracting strategic and high value-added activities, the region may be aiming to embed an already strong automotive manufacturing industry. In the pharmaceuticals industry, focusing on R&D in biotechnology and manufacturing and logistics and distribution activities in the complementary medical goods sub-sector. Here the strategy may be to fill in the value-added chain and develop clusters, as well as benefit from the worldwide rapid growth in biotechnology. In the telecommunications industry, focusing on manufacturing, R&D and shared services in telecommunications equipment and R&D in the software sub-sector. The strategy could be to develop an export intensive manufacturing industry and also create a large number of supporting high quality service sector jobs through attracting companies to relocate their units that provide services such as billing, customer complaints, etc. . This work compliments software development in telecommunications. In the textile industry, focusing on manufacturing, design and clustering with suppliers. The strategy could be to develop an export intensive manufacturing industry and also good links with producers of textile machines and fabricsintensive manufacturing industry and also good links with producers of textile machines and fabrics

       3. Marketing action plan to attract investment in selected targets that includes budgets, time frames, actions and responsibilities

The marketing plan should be coherent with the Strategic Plan. As for the Strategic Plan, quality is more important than quantity. It should review the city’s competitive strengths and weaknesses through a SWOT analysis and a simple benchmarking analysis that indicates key assets and inadequacies of the city for an investor. This will help justify the selection of target sectors and types of desirable investment. Finally, the plan must be both creative and realistic and reasonably resourced (bearing in mind that cities are not wealthy).  

Marketing Action Plan - Examples

The action plan must be designed to promote the City in the target sectors it has selected. The marketing action plan consists of long-term goals and short-term projects and activities and quantified objectives based on the implementation of the plan. The statement of goals must be clear and concise and provide direction about where the city wants to go and what does it want to accomplish. Therefore, a goal to “diversify the local economy” is too general and does not provide proper guidance. However, a goal of “establishing the community as an attractive location for automotive component suppliers” would be specific and guide efforts to identify relevant projects to meet these goals. Projects should (1) lead to reaching the goals and (2) identify the key result to be achieved, as well as numerical or other measurable indications of progress. There will be more than one objective for each goal. Some may be short-term, others long term but within a one to three-year time frame. Objectives must be realistic, attainable and within the competence of those responsible for their implementation. The human, financial and institutional resources necessary to achieve them must be in hand, accessible or at the very least, identifiable. Referring to the goal of attracting automotive suppliers, one objective that could be useful might be: "Economic Development Department, in cooperation with Chamber of Commerce, will implement a target direct marketing program to reach the largest 100 component manufacturers in Germany.”  Once the goals and projects have been agreed upon, specific activities and tasks need to be identified. , These will be the specific actions that determine how each project is to be achieved. One characteristic of an activity is that it can be assigned to a person or institution to carry out. Returning to our previous example, one strategy in implementing the target auto parts marketing program might be “Chamber of Commerce will establish a direct mail program, including preparation of an industry-specific marketing brochure, by March 2007.” This may well include other tasks such as creating a mailing list. There will also be additional activities aimed at completing this project.

There are several conditions crucial for successful implementation of each action plan:

• The responsibilities must be allocated to individuals with the skills and competencies required to enable them to do the job
• The budget for the activities must be realistic and available
• All activities must be measurable and bring very specific results

The marketing plan will most probably use several of the following marketing tools:

What marketing tools can be used?
In order to promote a location, it is essential that there is an internationally recognizable brand name that external investors can associate with the city’s location. Because potential investors cannot possibly investigate every location on earth, they generally assemble a preliminary list of places that they should investigate. Brand, image and reputation are critical for assembling such a list, and general perceptions by companies and investment brokers about a particular location will affect whether the location is listed as a place that a company should seriously consider. Marketing aims at creating awareness of an area as a location for new investment, among potential investors and corrects misperceptions about the area that could act as detriments to investor interest, and in general aims at building the image of the location so as to plant it firmly into the awareness of investors.

Marketing is central to investment promotion, but is often a contentious issue. While evidence suggests that effective marketing can raise the profile of a location, there are always questions over the level of resources required, what marketing techniques should be employed and how much value marketing produces. Unfortunately, there is not a single answer. Each location is different, and marketing also has different objectives, from putting a location on the map, to developing a new brand image that demonstrates the uniqueness of the location, to simply repositioning the existing brand image so that it becomes more attractive to a certain type of inward investor. Each location’s offer is likely to, and in fact should, be constantly evolving as its competitive position and the market opportunities change, which in turn may require new marketing initiatives. There are many marketing techniques, each of which can be used separately or be combined together for investment promotion. Marketing techniques used by agencies to influence their brand image and to generate real interest among real investors include:

A. A General PR campaign, for example, through advertising in newspapers, on bill-boards, on television (such as on CNN or for infomercials for business class on international planes), in business and industry specific journals and on Web sites, is often used. These general PR techniques, however, tend to be less successful in landing specific foreign investment projects than focused marketing techniques. Nevertheless, there is a good argument for general PR campaigns when the reality in a country is better than the preconceptions held by the international investment community, or when a country has not been a major host for FDI in the past. PR campaigns are therefore particularly effective for locations that lack a recognized brand image, as is the case with many countries and regions in Central and Eastern Europe. But general PR campaigns are expensive, and they should not be the sole marketing approach taken by a city with a limited budget.

B. Printing of brochures, newsletters, CD-ROMs and fact sheets for distribution in conferences, investment missions and Web sites, is also a common marketing technique. High quality information and communication play a key part in all locality selection stages. Brochures and CD-ROMs are perhaps most effective when used in conjunction with other marketing techniques and when they are sector- or industry-focused. Inward investment newsletters can highlight key changes in the economic environment, policy changes and recent project successes, and can be useful in keeping potential investors up-to-date with the latest information on a location – generally they are being prepared on national level and less often on regional level. Fact-sheets represent more focused marketing tailored to specific sectors and individual companies, and are often more effective in generating interest from companies (no company really wants to read an 80 page investment brochure) and make more efficient use of limited investment promotion budgets.

A city should have pre-prepared library of the following documents / marketing elements, which can be offered to potential investors:

• Computer generated (or printed) brochure and fact sheets about the city and the surrounding area / region where appropriate (foreign language version is necessary – at least English). General categories which a brochure / fact sheet should contain are described in Appendix 1.
• Case histories of successful companies in the city
• A generic slide presentation about the city which can be adapted for specific investor presentations
• A map highlighting the location of the city relative to existing and planned transportation infrastructure and major population centers
• Photographs and details of property options available for investors.

Given the resources available in most cities, the standards of these documents should pay regard to professional, concise and informative information, rather than to expensive, glossy presentation. The list of materials that has been provided above is not exhaustive. Rather it should be considered as the bare minimum necessary to provide investors with the information they require to make an initial evaluation of the location.

In preparing the materials, it is necessary to emphasize the clarity of the quality, layout and graphics, but even more important, whether there is the desired amount of useful information for a potential investor. Do the materials demonstrate understanding of business needs? Do they reflect the city’s economic strategy and the key product strengths that the city offers investors? Do they present a positive and professional overall image of the City that would encourage a contact or visit by a potential investor? Is the quality of the foreign language versions acceptable?

C. Participating in investment exhibitions, that are held annually in, for example, Vienna http://www.biztradeshows.com/trade-events/real-vienna-real-estate-investment-fair.html, Cannes http://www.reedmidem.com/v3/Shows/Mipim/fr, Leipzig http://www.leipziger-messe.de, Munich http://www.exporeal.net or Kobenhagenhttp://www.nepix.com/english is another method of city promotion. This method is more about networking and learning from others than generating interest from investors, however, it may be an important part of a general PR campaign to create a reputation and brand for the city. If the city decides to take part in such an exhibition, we recommend that the city join forces with a larger regional / national presentation. This will reduce the cost to the city, and will guarantee higher interest of potential investors than individual presentation of a city. English and German speaking staff, high quality promotion materials, power/point presentation and / or video presentation of your location are basic conditions of successful participation.

D. Regional conferences on investment opportunities provide information, introduce potential investors to the culture of the location and to regional differences and build the area’s image. The most successful conferences are sector-based and include presentations by satisfied investors. This helps maintain interest in the conference, adds credibility, attracts a private sector audience and demonstrates the business-friendly approach of the city / region. Furthermore, the fact that a city has been able to gain private sector support of your sector strategy is a good indication that the strategy is realistic. However, remember that it is quite difficult to persuade potential investors that they should attend regional conferences and it should be organized only after basic awareness about the specific region has been already raised by efforts at branding and image-building through active media campaigns that boast of the city’s successful private investors.

E. Business conferences are a relatively straight-forward and effective method of making contacts and networking with companies in target sectors and locations, but they are often very expensive to attend. You also need quite skilled representatives, both with language skills and understanding of the problems of specific industry / business. This type of representative must be able to maintain a serious discussion with real business people and to explain to them potential advantages of investing at your place. 

F. Investment missions in key source countries to generate interest in the city and to start networking with potential investors and the wider investment community are also useful tools. Sector missions can be successful if guided by prior research that has identified specific firms to target for interviews and meetings. and the missions must feature customized “sales” presentations that match the presumed needs of the target investors with the demonstrable ability of the city to meet those needs. Several techniques to maximize the effectiveness of investment missions are to bring an already existing and satisfied investor on the mission, to limit the number in the delegation to a small number of people, all of whom have important things to say, and to identify the potential investor’s key decision-makers and responsible persons beforehand, so as to concentrate time and effort on influencing them. 

G. Trade missions can be a very successful method to develop strategic partnerships (such as joint ventures, technology licensing, and outsourcing agreements) between domestic and foreign companies. Inter-firm partnerships are recognized as vital to technology transfer and the business development of small and medium-sized enterprises (SMEs), especially in developing countries. Furthermore, this non-traditional FDI can often be a precursor to more traditional market entry methods. The most successful trade missions are sector focused and involve the careful selection of a relatively small number of firms, all of which have a potential business role to play in the desired strategic partnership.    

Both investment and trade missions might at first be organized from the national level with participation of regional or city representatives; however, strong and specifically oriented regions or cities with recognized specialization in specific industries may also successfully use these tools.  

H. Direct mail campaigns to private and public organizations are also often used as a marketing technique. This, however, is normally not the most effective method to generate general interest and concrete investment proposals, at least to the extent it is used as the city’s sole marketing tool. However, if mail campaigns are used as a step in a broader approach to marketing, they can be extremely useful and cost-effective. For instance, mail campaigns that are used to gain general market intelligence about companies that may become investors are very useful. Mass mailings of questionnaires or of simple solicitations asking if the mail recipient wants to receive more information about your city, can give you a feel for the market of potential investors. It is obvious that such a campaign should be focused on firms from sectors of specific interest which may be interested either in expansion to new markets or reducing of production costs. Successful foreign investors already located in the country or Central / Eastern Europe very often look for locations for further expansion and may be good targets for a mail campaign followed by a telephone campaign. 

I. Telephone campaigns to private and public organizations is likely to be effective and cost-efficient only as part of a company targeting strategy, focusing on key players and contacts within target sectors.

J. Creating a city / region FDI-related Web site is vital for developing the awareness and brand image of your city, providing critical information to a wide audience, gaining market intelligence, and reducing the costs and time for delivering marketing materials and brochures. The Web site is also becoming an important vehicle for generating specific investment inquiries, especially from companies in the information technology sector.

Benchmarking Web sites: best practices from 10 sites Almost every Investment Promotion Agency (IPA) has set up its own Web site, some far more sophisticated than others. There are three arguments for IPAs to make effective use of the Internet. First, the increasing number and quality of IPA sites suggest that they are having a positive impact. Second, the rapidly growing importance of the Internet for marketing and information gathering indicates that more and more, the Internet is crucial for investment promotion. Third, there is a growing number of private sector Web sites offering a whole range of inward investment information, of which www.techlocate.com and www.ipanet.net are among the best. This fact alone suggests that the Internet based market has already taken hold. Based on 10 IPA Web sites (five for developing countries and five for developed countries from the four regions of the world), the key types of information being offered include: Geographical location and market access (with maps) Labor costs and availability and labor skills and education Property and site costs and availability — through photographs, virtual tour and search functions Infrastructure quality and costs (transportation, utilities, telecommunications, Internet) Technological infrastructure (R&D, patents, university-based clusters, graduates). Joint venture partners search function Information and links to sub-national regions Corporate climate, culture and quality of life Support available from the IPA and other agencies and red tape FDI trends, leading investors and testimonials Sector-based information, presentations, research/annual reports and marketing brochures, all downloadable Information on the wider region, e.g. Eastern Europe, former CNS, Balkan region Latest news — sometimes available as e-bulletins A best practice Web site should combine the following features: A clear, easy-to-use structure, with a site map and search function. Speed, with simple, but effective graphics.

Company Targeting

Intensified competition for inward investment makes it crucial to develop clear and distinctive business arguments to demonstrate your city’s competitive advantage in promoting areas for particular sectors. Leading FDI promoters are increasingly using sophisticated mixes of specific city assets in order to target individual companies with specific business requirements. This is a complex and long-term process with two main parts – identification of investors and building relations with them.

1.     Identification of potential investors

This involves identifying potential investors in priority sectors. The number of investors so identified should be reasonable and manageable, which means that the city should identify no more potential investors than it is able to service and to pay attention to. The traditional approach uses business databases and consultants to identify companies through evaluation criteria, often based on factors such as

• whether the new company is compatible with existing or prospective businesses in the city
• level of technology utilized within the company
• what employment it will generate
• use that it will make of local resources and potential for successful embedment into local economy
• the size and economic success and performance of the company,
• R&D intensity of the company, and
• historic exports to the city or region or nation, so that it can be said that there is already local demand for the company’s products

Companies that fit this criteria in each target sector may number in the thousands, and these can be narrowed down to a hundred or so by focusing on companies that are “active” investors with recent FDI projects and those with an explicit internationalization or globalization strategy. Accurate contact details for each company are needed so that initial approaches can be made. Despite being a resource intensive process, this is only the starting point. It is very unlikely that the companies identified will have immediate FDI projects that the host location can compete for. The key factor to generate prospects is relationship building, and a traditional company targeting approach can be useful in providing an initial list of companies from which to begin the process. 

2.     Relationship building with target companies.

As FDI “hunters” now target activities as well as sectors, traditional company targeting becomes more difficult. Activities such as call centers, headquarters or e-business cut-across sectors and do not fit into standard business classification databases. Hence, many agencies are focusing increasing resources on developing long-term relationships with senior contacts in investors that already operate on the territory, and are networking in business organizations (Chamber of Commerce, Associations, etc) and at conferences and investment and trade missions in order to identify potential investors and projects.

Whether target companies are identified using a traditional company targeting approach, or through business networking, relationship building is key. When a city representative, which we will call a “project officer”, first approaches a potential investor, the mindset of the project officer is crucial. If the officer believes that creating good contacts is simply a case of asking a company only one question - if they have an FDI project - and then moving on to the next company without trying to establish effective communication, he will not only be unsuccessful, but he will also very quickly lose his enthusiasm for this kind of work. It is vital to appreciate that it is not companies that make investment decisions but people, and so a good project officer is someone who can form good relationships with people.  

A successful project officer is one that develops a long-term relationship with key people in potential investors. Rather than a hard-sell approach (“you must come to see us tomorrow and I’ll call you everyday until you do”), in the initial contact the advantages of the location and the assistance the city / region can offer should be outlined. If there is a specific opportunity, such as a new science park, this can be outlined to the company. The project officer contacting the company can offer to send more information by post. (Often the company will request this anyway.) A one-page, well-presented, clear and succinct proposition-based summary focusing on the unique and distinctive advantages of locating in the region and tailored to the individual investor is often an effective approach.

Approaching companies should not be seen as a methodical exercise; it is not about one-off approaches to a fixed number of companies each day, but rather a market intelligence gathering and relationship building campaign. For companies that appear to have a more immediate interest, suggesting an appointment to meet and discuss with the company in more detail the opportunities in the host location can be appropriate. If an appointment is made, a relatively senior figure from the IPA should meet the company, possibly accompanied by a sector expert. 

It is important to have a sustained approach to companies and to develop long-term relationships. Techniques to build a relationship with target investors include:

• Drip-feeding the company with regular information updates on the location, tailored to the individual company’s requirements.
• Organizing networking events that bring together the city, key target companies and the wider investment community. These can revolve around formal sector-specific conferences and more informal events, for example related to important social and cultural activities. The use of embassies is one way to attract more attention and reduce costs. Contacts in the investment community, e.g. through expatriates, can be leveraged to support networking events.  

Accepting Investors’ Visits / City presentation

After all the marketing work is done, investors start to appear in your city to see the specific product you are offering to them. Since at the first visit the investors usually consider many other locations, they are first of all looking for reasons why NOT to choose your place. That is why it is so important that you are able to demonstrate an understanding of investors’ needs and to present the city’s key product features and benefits to a potential customer in a convincing manner.

The main components of preparation for the visit of a potential investor include:

•  The plan of the day organized including sight-seeing of the potential investment property and presentation at the City Hall, taking into account the investors needs (visit of University, Employment Office, airport / logistics terminal).
•  A presentation of the City delivered by the Mayor or senior executive using the materials and information produced – Power Point presentation, maps and pictures of city and investment property offered.
• Capability to answer all questions the investor might have and to provide all necessary information. It is obvious that while the city presentation focuses on the strengths and positives, the investor may and will be interested to know the opposites. The information you provide must be correct, existing problems should not be hidden, and ways / policies / activities taken for improving the situation should be stressed.
• Finally, it is important that the local community demonstrates commitment in meeting the investors’ needs and offers a positive attitude to investor.

Final Comments

Generating investment is both time consuming and labor intensive, and positive results do not come from one meeting, one direct mailing action or one investors’ conference. It is not unusual that certain investors take years to make an investment decision about locating in a specific city. This work requires dedicated LED specialists with both necessary skills and political support from local / regional government. Understanding of basic marketing techniques may help them to be more efficient in their work. 

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WEB RESOURSES

1. http://www.fdipromotion.com/ offers investment promotion practitioners access to growing collection of resources and tools that support organizations seeking to attract and retain foreign direct investment (FDI)
2. http://www.waipa.org is a site of World Association of Investment Promotion Agencies and provides access to the best practices in investment promotion
3. http://www.fdixchange.com/ Developed by the World Bank Group‘s Multilateral Investment Guarantee Agency (MIGA) this e-mail alert service builds upon MIGA‘s existing suite of online information services for the international investment community

APPENDIX 1 General content of FDI promotion fact sheets

General information about the locality, namely location and climate

The first thing in which each investor is interested is the geographic location of the city. The city must be introduced as well accessible with road distances to important cities (country and regional capital, large cities abroad). Available / close border crossings should be also listed. 

Since investors – especially from distant countries – may be afraid of weather conditions (long and cold winters, hot summers, too much rain, etc…) it is recommended to provide basic data about local climate – at least average rainfall, average temperature in January and July, and general wind conditions. 

Demography and labor climate

Most investors come to Central and Eastern Europe because of availability of labor – skilled, educated workforce. Therefore population of the city needs to be presented as a young, dynamic, educated with competitive salaries. In this section the following information should be provided / considered: 

• Population (age structure, distribution of men / women) with the stress on economically active age. Investor must know whether the population is younger than the national average or if strong age groups are going to become economically active in next years.
• Education level (share of population with tertiary and secondary education, share of population with professional training). This data is available from Census, is reliable and all communities can be benchmarked against each other. However, if there is some specific positive (higher knowledge of foreign languages because of traditionally mixed population or closeness to border) must be also presented.
• Secondary and Tertiary Education Institutions will be both a source of qualified work force and potential partners for research and development and innovative technologies / processes.
• Work Force Profile focusing specifically on economically active population and informing about average wage in selected sectors / professions. If the city is an important center for travel to work, this should be also mentioned and data for entire region out of which workers are usually coming will be provided.
• Unemployment is for investors the natural source of available workforce. The city should provide accurate information about the available pool of unemployed but skilled and professionally trained workers – current unemployment rate, qualification and age structure and information about long/term unemployment.

Transportation (transport infrastructure) must present the city as a place where it is no problem to deliver goods (and people) on time. The positives of the city (transportation hub, highway, airport with regular flights, railroad junction, sea / river port) must be underlined. 

• Road connection is the most important way to deliver goods for a majority of investors. Short distance to motorways and main transportation crossroads can be an advantage, and good accessibility of specific industrial sites within the city can also be an advantage.
• Rail connection still plays an important role for many investors (heavy industry, construction materials, oil processing, etc…) so mention all lines going through city and / or railway connection to the industrial site.
• Air transportation. How far is an international airport with regular flights to country capital / abroad? Is there a local airport operating domestic flights? Is there an airport for cargo and charter flights? This all can become an advantage and reason for an investor to locate in your city.
• Water transportation – is there a river / sea port in your city or close to it? In that case you may focus on investors requiring transport of large amounts of raw materials and should mention it in the brochure.
• Logistics – are there companies operating truck transport and able to guarantee delivery of  goods within a certain fixed time? Is there a terminal to switch from one mode of transportation to other (rail / road; water / rail, etc…)
• Mass transportation. The industrial site for new investors is usually located far from the city center, and investors will require their employees to get there not only in the morning but also for afternoon and night shift. Can the mass transportation system solve this problem? How many lines are there, how many buses, how many people transported in last years?

Information about utilities and the technical infrastructure need to demonstrate the capacities of both the entire city and the specific industrial sites. Data both for price and capacity of water and sewerage lines, gas, electricity, heating delivery and for telecommunications and internet connections should be provided. If an important investment to increase the capacity of one of the utilities is under way, it can be mentioned. Notes about waste collection, landfill site and liquidation of hazardous waste might be added.

Information about the economy must show the city as a traditional leader in specific kinds of industries / services and the section might b divided into following subsections:

• Employment and companies by sectors – where are people of our city traditionally employed? What are the most important sectors? How many companies / businesses and in which sectors were founded in last years?
• Productivity numbers – if available. What are the sales (per employee) in different sectors? What is the regional GDP?
• Export orientation – are there traditional customers of local companies? Is the local economy export oriented?
• Important companies – what are the biggest employers / exporters in the city / region?
• Important investors – have foreign investors already come to the city? In which sectors of economy? How many people do they employ? What is the expansion / growth potential of the companies in the area? Are there new companies coming or expansion by existing companies in the area, is there new or projected construction in the area?
• Potential suppliers – does local economy offer potential suppliers (construction companies, service companies, transportation companies, firms processing raw materials and producing components?

Quality of life becomes more important factor since foreign managers often come to operate the business in your city

• Housing is one of the key factors influencing the decision to locate elsewhere. What is number of apartments and number of residential houses in your city? What are prices and rents of housing? Are there available free apartments? Are private developers building new houses?
• Health care - is there a big hospital with internship medical faculty in your city, spa or rehabilitation facility?
• Culture – what is most prominent institution / event in cultural life of your city? Is there an opera / theater / gallery / concert hall / museum? Be careful – this part is only an appendix to the fact sheets and should not be excessive! Investors are first interested in work force and technical infrastructure and then in quality of life.
• Religious institutions– be careful since you do not know where from the potential investors may come. However, for Christian / Jewish society you may mention the prevailing religion of your community and important churches / synagogues.
• Other amenities (sport grounds, music clubs…)

Regulations (Taxation / Zoning). Does the city have the Physical Master Plan? What are the permitted businesses in specific areas? What is prohibited? What are the local fees / taxes (if applicable)?

Important Institutions – provide contacts to local government, tax authority, Customs office and all institutions which may have influence on establishing / running business in your city.

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