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Site selection decisions: what are the factors?

Each December, Area Development magazine publishes its annual survey of corporate executives regarding factors in selecting sites for new facilities.

The results of the 2004 survey are in the chart to the right, followed by this writer’s commentary.
The numbers reflect the percentage of respondents who said that the factor is important or very important.

Critical factors up and down the list

Let us begin by looking at which factors went up and which went down.

Labor costs not only leads the list, but is considered very important or important by 96.4% of the respondents. Issues related to labor and personnel are revealed to be critical factors in the site selection process.

Just look at how many factors deal with the subject — labor costs, availability of skilled labor, low union profile, right-to-work state, availability of unskilled labor, training programs and proximity to technical university. All relate to the people component.

State and local incentives come in at number four on the list. Two years ago it came in at No. 1. Expect to hear a lot more about this topic in the future because of two things that are bubbling under the surface. First, there are an increasing number of studies being done on the value and cost-benefit of financial incentives. Secondly, there is litigation at the federal appeals court level challenging some aspects of incentives, and more lawsuits are expected.

High-tech infrastructure; environmental issues

Note that telecommunications popped up at No. 9 and No. 10 on the list. High-speed Internet access in rural communities is getting a lot of attention at this time. Many economic developers see it as basic infrastructure and critical for rural communities to compete for new projects.

Proximity to major markets dropped more than seven points. My guess is that the benefits of logistics and distribution centers are being realized.

Environmental regulations went up almost eight points, indicating increasing concern with this issue. Mississippi could well find itself in the middle of a environmental storm if the Legislature makes drastic cuts to the Department of Environmental Quality.

Training or trainable?

Just over half of the respondents said that training programs were important or very important in the decision. Yet only 32.4% listed proximity to technical university as such. Draw your own conclusions, but I suspect that this has something to do with companies wanting trainable workers, instead of merely trained workers.

I’ll leave you with a challenge. Go down the list of factors and consider whether Mississippi has a strategic advantage or disadvantage regarding each one. That is one of the things that the Blueprint Mississippi and Momentum Mississippi process did. It is also one the things that site selectors and corporate executives do when making site selection decisions.

Phil Hardwick’s column on Mississippi Business appears regularly in the Mississippi Business Journal. His e-mail address is phil@philhardwick.com.


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