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Advanced Investment Targeting Course

Understand the investor decision-making process, corporate strategy, project location priorities, and influence on location decisions. Learn how to tailor approaches to match investor requirements.

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Advanced Investment Targeting Course

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  1. IFS and TfT training course: Investment Targeting for Economic Development Understanding Investor Decision-Making

  2. Module Objective • By the end of this module, participants should be able to tailor their approach to investors to match their requirements.

  3. The Investment Decision-Making Process • The Corporate Strategy Decision • Project Location Priorities • The Long-List of Locations • The Short-List of Locations • The Preferred Location • What promoters should do to influence location decisions Overview

  4. The Location Decision Process Corporate strategy decision Are we going to invest internationally? Project location priorities What are the projects’ requirements? Long list of locations Which are the ten possible locations? Shortlist of locations Which are the three best locations? Preferred location What do we require to locate here?

  5. Corporate Strategy Decision • Will we invest internationally? • Decision based on strategic priorities and by issues such as the location of existing operational plants, offices and other facilities • What are the priority regions and markets to serve? • Where are the international markets with most potential? • National and regional GDP, Per capita income, Current trade levels, Consumption trends, Prices, Competitors present, marketing and distribution networks, transport facilities, FDI flows, etc.

  6. Project Location Priorities • The Project Decision Framework • Large v. Small Scale Projects • Hi-Tech v. Low-Tech Projects • Exceptions: • Suppliers locating close to a TNC • Privatization or M&A • Extractive industry: oil, gas and mining

  7. The Long List of Locations • The long listof potential locations tends to be compiled as a subjective process based on corporate and advisor perceptions. • It may generate around 5-10 possible locations in a target region or country. • What are the subjective criteria and perceptions used to determine a location’s position on a long-list? • General perceptions of emerging economies • Specific perceptions of investment locations

  8. Internationalization roadmap: perspective of consulting firms Conception and Defining Location Evaluation Negotiations and Implementation 1 2 3 4 5 6 Strategic Assessment Longlisting & Location Screening Modeling & Comparison Community Evaluations Incentive Negotiations Implementation Strategic Context / Business drivers Define Internationalization Project Selection Location Factors (criteria defined) Weighting and Prioritization of location factors Long listing locations Start data gathering of candidate locations Analyze and interpret key data Present shortlist • Complete data gathering of short listed locations • Modeling • Comparison/Analyze and interpret the data • Present ranking and sensitivities Regional Location Assessment On-site data validations Impact of Regional Trade Agreements Preliminary incentive negotiations Leverage Business Case (grants, tax, incentives, etc.) Company set up: Real estate, HR, IT, audit, legal, tax, financing, permits, ... This part of the decision-making process that will be proposed once the final short-list locations have been identified. Evaluationphase with client Source: Earnst & Young

  9. Total Weighted Qualitative Score Taxation and Incentives 6.7 6.5 Logistics and 6.4 6.3 6.2 6.1 6.1 Infrastructure 5.9 5.7 5.7 5.7 Labor Flexibility Labor Availability Business Support Environment General Business Turkey Poland Thailand Romania Malaysia Czech R. Environment China (Shanghai) India (Tamil Nadu) China (Guangdong) Indonesia (Batam) Brazil (Sao Paulo state) Analysis of Initial Long-list of Candidate LocationsResults: Qualitative Analysis Consulting firm Source: IBM Consulting Services

  10. Analysis of Initial List of Candidate Locations Results: Combined Financial and Qualitative AnalysisConsulting firm evaluation Highquality 8 Best Best Best Value Proposition Value Proposition Value Proposition 7.5 Detroit Stuttgart South East England 7 Tokyo 6.5 Melbourne (Score from 0 to 10) Quality score 6 Sydney Seoul 5.5 Shanghai Kuala Lumpur Bangkok 5 4.5 4 225 200 175 150 125 100 75 50 25 0 Lowquality Operating cost index (average = 100) High cost Low cost Source: IBM Consulting Services = Location solution cluster

  11. The Short List of Locations • The short list of possible locations will be derived through more objective research, based upon detailed analysis of factual data. • This is likely to narrow the possible locations down to a maximum of three country options, and these will be ranked in attractiveness to the potential investor. • What are the objective criteria used to determine a location’s position on a short-list ?

  12. Barcelona Ease of recruitment Dublin 10 8 Stability & loyalty Competition for skills 6 4 2 Availability of required skills 0 Productivity Labor relations Overall availability of staff Labor regulations Detailed Evaluation of Short-listed RegionsLabor Market EvaluationConsulting firm evaluation

  13. The Preferred Location • The preferred location is chosen when the location appraisal process confirms one location which has a feel good status with the investor sufficient to begin negotiations with the host government. • This is when a project finally gets serious. • Next to actual investment this is the desired outcome of all investor targeting and promotion.

  14. Guidelines for Investment Promoters • Understand the purpose of the project for the investor • Be aware of what stage the decision-making process is at • Appoint a single client executive contact • Rapidly provide accurate, timely information • Encourage established FDI to be positive to the potential investor • Ensure an understanding of the project in key ministries and agencies

  15. Confidentiality • The decision to consider investing in your location is commercially sensitive to the investor • It is also commercially and politically sensitive to your location and inappropriate disclosure of investment consideration can lead to you losing the investment • All discussions with potential investors should therefore be confidential and a willingness by the IPA to sign a confidentiality agreement is a good sign of their integrity and professionalism

  16. Confidentiality agreement • A confidentiality agreement template is attached in your reference guide • You can use it in your discussions with investors

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