The Leader - May/June 2008 - (Page 60)

G l o B aliz a tion 2 .0 : site selection co ns ultants s co uri nG tHe G lo Be to Me e t cli e nts ’ De ManD s A weak dollar creates opportunities in the U.S. for companies and investors from all over the world. Combined with many states’ incentives for green power production, the dollar’s downturn earns the U.S. a closer look for European firms looking to capitalize on the States’ nascent green energy sector. jobs created by foreign investment, more than 100,000, according to the same report, while Asian financial services nexus Singapore lead the world in terms of job growth relative to overall population, with approximately 600 jobs created through foreign investment per 100,000 people. Despite high turnover and wage and real estate inflation, these markets remain highly desirable because they still offer lower costs than many North American and Western European locales. Perhaps more importantly, China and India, as well as Malaysia, and Vietnam, offer the largest emerging markets in the world, drawing a wave of expansion from companies like Cummins Inc., one of the world’s largest engine manufacturers, whose massive India and China operations serve both local markets and provide exports. “People are moving work around the globe like they never used to, and they’re staying there for a number of reasons, first among them the quality of service from the BPO providers,” said Mark Gibson, Ernst & Young’s U.S. leader for its corporate real estate solutions practice. “It’s also hard to come back once you’re there. They’re moving to the Philippines from India, but they’re not coming back to the U.S.” But India and China’s top cities, as well as Manila, may be a little too hot for some tastes, with 50 percent to 100 percent annual employee turnover, not to mention the aforementioned wage and property inflation issues, Gibson said. That’s driving site selection consultants and their clients to examine locations like Huzhou and the Pearl River Delta in China and Hyderabad and Chennai in India. “Some of the more forward-looking organizations are looking at tier two and tier three cities to manage HR and turnover issues because there’s less demand,” said Matt Highfield, consulting managing principal at New York-based Cushman & Wakefield. “However, there are relatively few stones left unturned.” Those second- and third-tier locations aren’t without risk in their own right. While they may offer the next bastion of low-cost labor, that pool’s skill sets, or variety of skill sets, may not be deep enough. “If you have a variety of functions you want to concentrate in one location, it’s more of a risk,” said Roel Spee, Europe, Middle East and Asia leader and co-global leader, PLI-Global Location Strategies at IBM Business Services. “That’s where you have to find the balance of what’s acceptable.” In many cases, multinationals are taking a step back and re-examining site selection and economic development basics, while, at the same time, taking a more sophisticated approach, said Kate McEnroe, president of Atlanta-based Kate McEnroe Consulting. It can start with the big questions – where do we need to be and why do we need to be there? To grasp the project’s wider scope requires input from a crossfunctional team – both from the client and consultancy – that can evaluate the operations, real estate, tax-structure, legal, supply chain and HR ramifications of a prospective location. “It’s very important at the beginning of the project to help them understand and help them help you understand their risk tolerance,” Highfield said. “There are a number of places that might have cheap land and cheap labor, but offer significant risks as to political climate, natural disaster and other areas. The process needs to be about three dimensions – financial, non-operational and risk tolerance. “Entering a market is one thing, but being able to sustain and grow over 10 or 15 years is equally important,” Highfield continued. From the corporate real estate perspective, if you don’t grasp the strategic goals of the enterprise and site selection from the outset to the exit strategy, you’re poised to fail. “If you don’t have those first big ticket items settled then you’re out shopping for space to see if it fits,” said Mark Gorman, Nortel’s corporate real estate leader. “These investments are significant, and we have to take the opportunity to influence it in a positive way. It becomes paramount to understand your business objectives.” From there, you drill down. If it’s tH e le aDe r 60 MaY / j u n e 2008

Table of Contents Feed for the Digital Edition of The Leader - May/June 2008

The Leader - May/June 2008 Leadership Contents Message from the CEO Real Estate in the News Green Real Estate Work Without Boundries Building Flexibility Into the Business Strategy Multi-Generational Work-Force Design Work Force Longevity Analysis Wells Fargo's David Nelson Pennsylvania's Michael Rossman Globalization 2.0 Site Selection Consultant Directory The New York Report: A Core of Traditional and State-of-the-Art Opportunities Discovery Forum Findings Industry Tracker Young Leader Career Development Effective Leadership Economic Development in the News A Look Ahead In Our Next Issue Calendar of Seminars Index of Advertisers Executive Development Spotlight

The Leader - May/June 2008

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