Chapter 7.4

Integrated Industrial Development Planning
(Industrial Development Magazine, November-December, 1987)

By Richard Carson

State industrial development professionals have borrowed from the methods used by large corporations to develop, promote and sell their products. Oregon's development program is founded " market research," "product development" and "sales" integrated from the state level down to the individual community.


The practice of industrial development has evolved into a very specialized and sophisticated form of marketing where the development organization should perform the same functions as a corporation in terms of market research, product development and customer sales. This analogy holds true because the product is a geographic region, and the organization is trying to identify and attract industry representatives to invest in its region.

Industrial development refers to the growth and diversification in the manufacturing and non-manufacturing basic industries that "add value," rather than industries that export raw materials. This narrow definition of economic development is founded on economic base theory and identifies industries that trade in markets outside of a region as being the wealth-producing base of the region's economy. The basic industries account for 54 percent of employment in Oregon and support most of the employment in the commercial and retail sectors of its economy.

The Oregon Economic Development Dept. developed the program to integrate several statutory requirements to:

- Conduct the research necessary for development of an industrial marketing plan for the state;

- Assist city and county economic development planning programs; and

- Support the department's general objectives of assisting in the startup, expansion, retention and recruitment of industries in Oregon.

Such a program is unique because Oregon is one of the few states with the ability to set industrial development standards for communities to meet in the development of local land-use plans. Oregon's statewide planning program serves a quality-control function in the local product development of industrial land, transportation facilities and utilities by providing input on what the state and locally targeted industries actually need.

The Oregon Economic Trends Project' is the research program initiated by the state to identify investment opportunities and to assist the department and local development organizations in refining their industrial

Market Research

The department developed the Oregon Economic Trends Project to tie together several research requirements  legislative and departmental  in an integrated product providing comprehensive economic development research to assist a number of specific audiences.

The net effect of the target industry approach is to identify industries that offer growth opportunities in sectors that will diversify and strengthen Oregon's economy, while building on the state's industrial base and its demonstrated comparative advantages. Industry targeting methods focus industrial development programs on selected industries that have a greater probability of success for development and are more cost-effective in program implementation.

The project's Growth Industries Report defines a list of industries for statewide industrial recruitment and expansion in both metropolitan and non-metropolitan areas of Oregon. This list also provides supportive data for the department's other non-recruitment business development efforts.

The selection of industries in the Growth Industries Report was accomplished by the use of a detailed ranking methodology, taking into account a number of national, state, regional and county economic factors. This data was complied from the U.S. Dept. of Commerce and as well as purchased from Data Resources, Inc.

Initially, 358 industry sectors, including basic service industries, were analyzed and ranked according to their scores based on the set of economic factors. Industries scoring higher than one-half the highest possible score  96 industries or approximately the top quartile of all industries analyzed  formed the basis for the Growth Industries List.

Growth Industries Report

Industry data utilized in generating the Growth Industries List:

- National level output and employment forecasts for the near term (1985-1990) and the far term (1990-1995);
- National changes in number of industry establishments;
- National payroll per employee;
- Historical change in the state's employment share; and
- Estimated output, demand and net demand-output imbalance at the state, regional and county level.

A screening process was then used to determine if selected industry characteristics, other than the previously mentioned ranking factors, might argue for the elimination of some industries from further consideration. These negative characteristics include:

- A low or declining industry capacity utilization rate, where output growth will be met with unused capacity instead of new facilities;

- A high industry concentration ratio, where total industry sales are dominated by a few large firms and expansion or relocation is unlikely;

- Industries dominated by very small establishments (less than 10 employees) that are relatively poor candidates for recruitment;

- A very small existing employment in the state, where the industry may be operating at a comparative disadvantage; and

- Unusual market characteristics or raw material needs that make the industry an unlikely candidate.

This screening process eliminated 26 industries, resulting in 70 industries that were included on the final Growth Industries List. The 25 highest scoring industries, all basic manufacturing industries, were then selected for further analysis and became the basis for the Project's Growth Industries Survey and the Growth Industry Profiles.
Common Sense
by Richard H. Carson
(Manufacturing Industries
Surveyed and Profiled)

SIC CodeIndustry Title
2034Dehydrated Foods
2512Upholstered Household Furniture    
2641Paper Coating and Glazing
2731Book Publishing
2753Engraving and Plate Printing
2821Plastic Materials and Resins
283(1,2,4)  Drugs 
3079Plastic Products 
3356Non-Ferrous Rolling and Drawing
3356Aluminum Castings
3479Metal Coating and Allied Services
3479Machine Tools Metal Cutting
3555Printing Trades Machinery
3573Electronic Computing Equipment
3622Industrial Controls
3661Telephone and Telegraph Equipment
3661Radio and TV Communication Equip.
3677Electronic Coils and Transformers 
3679Electronic Components, NEC        
3693X-Ray Apparatus and Tubes       
3799Transportation Equipment, NEC
382  Measuring & Control Instruments
3842Surgical Appliances and Supplies

Product Development

Labor training, academic programs, local regulations and cultural amenities are all candidates for improvement through an industrial development program. Such a program also ensures that the favorable information on a region's competitive advantages are provided to industry representatives.

However, if you can't deliver a suitable site, transportation access and infrastructure, then you are missing the fundamental building blocks of industrial development. That is why land use planning plays such an important role. Anyone who has ever been involved in industrial development, either as the corporate site selector or as a local representative, knows the situation where a suitable site cannot be found in an area.

Local land use and economic development plans are interrelated, but either type of planning can and often does proceed independently of the other. Unfortunately, this is like a business proceeding with product development and customer sales as totally independent functions. In reality, the degree of success in implementing land use and economic development plans will depend on how well they are tied together through market research and an integrated action plan.

Community economic assessment and target industry studies are common components of local economic development plans. However, significant expenses can be incurred in assessing the community's needs and assembling the comprehensive database. In most states only the larger metropolitan areas can undertake such research and analysis, yet the project's nationwide survey results indicated that fully half of the respondents were looking to locate in small towns. These types of studies are rarely done by most small cities in Oregon or any other state because the cost is prohibitive, the economic data is not readily available, and the technical skill needed to interpret the data is not always available locally.

Oregon's statewide planning system puts the state in the role of developing goals and rules that require local comprehensive plans to include an analysis of a community's economic patterns, strengths and weaknesses. The communities are also required to define policies concerning economic development opportunities.

In turn, the state's Economic Development Dept. is required to provide information on the state and national trends that will affect the community. This information is provided through the project's Local Development Program Guide, which is designed to help the community interpret and implement the information through the planning process.

The department did its homework on the needs of potential industry customers. A nationwide Growth Industries Survey was developed to provide each community with the specific industry location factors required by each of the targeted industries on the Growth Industries List. With this information a community can evaluate the potential "locational fit" by comparing its assets to the industry's location requirements.

This was a stratified random-sample survey of 750 CEOs, presidents and other decision-makers that has a reliability factor of +/- 3.6 percent. The 48 survey questions were cross-tabbed by industry type, employment size, sales volume and geographic area.

Industry Location Factors

- There were slightly more surveyed companies preferring to locate in a small town (50 percent) than in a metropolitan area (45 percent).
- The majority of the companies surveyed (93 percent) did not require any rail service to the site.
- Two-thirds of the companies (69 percent) wanted to be located within 15 minutes of an interstate freeway.
- One-third (30 percent) of the companies required access to an international airport, one-third (29 percent) to a regional commuter airport and less (12 percent) to a general aviation airport.
- Two-thirds of the companies (69 percent) required light industrial zoning, while one-third (29 percent) wanted general or heavy industrial zoning.
- Most of the surveyed companies (88 percent) wanted public infrastructure to be delivered to the site within one year of the site location decision.
- A site size of five acres or less was preferred (74 percent) by most of the companies.
- A facility size of 50,000 sq. ft. or less was preferred (77 percent) by a similar number of the companies.
- The preference to build (34 percent), lease (33 percent) or buy (25 percent) a facility was about equal.
- Most companies (71 percent) would have less than 50 employees on site.

Customer Sales

Analyzing a region's comparative advantages is a totally different function than determining the needs and composition of a local economic base. The assessment of the comparative advantages important to a plant location include: labor (productivity, availability, wages), transportation facilities, site and building availability, business support services, utilities, energy availability and rates and taxes.

Oregon's industrial marketing program is based on both the project's quantitative research and a qualitative review by private-sector marketing professionals. In particular, the marketing strategy is defined by the Growth Industries List of industries determined to offer the highest recruitment and expansion potential and the Growth Industries Survey, which focuses on the needs of industry and the most effective techniques by which to market to them.

Traditionally the program elements of industrial marketing plans are based on the experience of economic development professionals. Oregon's program is unique because through market research the department has intentionally surveyed growth industries nationally and created a baseline of information that represents industry opinion and trends.

With the basic parameters for the department's industrial marketing program defined by its marketing research, the challenge is to design an integrated set of activities for use in marketing to the targeted industries. Marketing techniques, by their nature, are most effective when used for specific, well-defined purposes. For example, direct mail campaigns are most effective in reaching pre-determined industry audiences with a specific message, while in-state investment visits by corporate representatives are most effective in promoting the first-hand experience critical to securing a final corporate investment decision.

Marketing Program Effectiveness matrix below shows the relative effectiveness of individual industrial marketing programs. The matrix provides a conceptual framework for the optimal use of such activities.

Reading across the matrix, it is apparent that the use of personal contacts is the highest rated activity. It is also an example of an extensively used marketing activity that is highly effective in all business development functions (start-ups, expansions, retention and recruitment).

The marketing program targets both industries and geographic areas for implementing its marketing activities. The purpose of this market segmentation is to subdivide the potential marketplace and to package product so it is attractive to the different audiences.

Promoting a product to an incompatible market segment is not cost-effective and is a waste of time. The primary market segments that an industrial development outreach program needs to consider are the type of industry and the geographic location of industries.

MarketingSurvey Program
Personal53%Very Effective
Contacts       23% Not Effective      High

In-State41% Very Effective
Visits    33% Not EffectiveMedium-High

Industry        38% Very Effective
Trade Shows 34% Not Effective      Medium

Direct Mail  30% Very Effective
Literature     44% Not Effective      Medium

Paid Media   25% Very Effective
Advertising   48% Not Effective      Low-Medium

Sales Calls   24% Very Effective
on Firms       45% Not Effective      Low-Medium

Media          23% Very Effective
Coverage     45% Not Effective       Low-Medium

Out-of-State 18% Very Effective
Missions**   50% Not Effective     Low

Promotional  18% Very Effective
Media   54% Not Effective      Low 

*Industry ratings are based on responses generated by the Growth Industries Survey. Other estimates based on department interpretation of available information sources.
** The "low" ranking applies only to domestic investment mission. The survey was done only for U.S. companies and not for foreign companies.

Industry Segmentation

There were some industries that had a higher than average relocation potential and indicated they would prefer to locate in another region of the country. These industries are also to be targeted in Oregon for retention potential:
- drugs,
- paper coating and glazing,
- x-ray apparatus and tubes,
- plastic materials and resins,
- plastic products, and
- machine tools, metal cutting.

Industries most likely to prefer a new manufacturing facility in the same state as they are currently located
- measuring and control instruments,
- engraving and plate printing, and
- electronic components.

Industries most likely to prefer a new manufacturing facility in the same region of the country include:
- book publishing,
- semiconductor and related devices,
- telephone and telegraph equipment, and
- printing trades machinery.

Geographic Segmentation

The market research shows which areas of the country have a higher ratio of companies that would be potential candidates for locating in Oregon. The actual breakdown of responses was:

- Oregon/Washington firms that would prefer to locate in the same state; this was 58 percent of the Oregon/Washington firms responding.
- Pacific region firms that would prefer to locate in the same region; this was 27 percent of the Pacific region firms.
- Firms not in the Pacific region that would prefer to locate in another region of the country; this was 11 percent of the total response.

In the latter category, companies located in one region indicating they would relocate to another region were:

- East North Central: Indiana, Michigan, Wisconsin, Illinois and Ohio.
- West North Central: Iowa, Missouri, South Dakota, Kansas, Nebraska, Minnesota and North Dakota.
- Mountain: Arizona, Montana, Utah, Colorado, Nevada, Wyoming, Idaho and New Mexico.
- West South Central: Arkansas, Oklahoma, Louisiana and Texas.

Companies in the other four regions all indicated less than a 10 percent relocation potential. This included the Pacific, Atlantic, New England, and South Atlantic. The Oregon/Washington area was the same as the Pacific region response (8 percent).

Marketing Messages

The Growth Industry Survey provides some indication of how industry nationwide perceives Oregon as an investment location. The survey asked corporate executives what, based on their personal experience, appealed to them most and least about Oregon as a potential site location. The answers to this market research help define the messages that a general marketing strategy should deliver.

Message 1: Oregon is centrally located for business investment. The number one response (36 percent) was the negative perception that the state is "not centrally located" and "not close to markets." In comparison, only a small percentage (five percent) felt that the state was centrally located. The message regarding Oregon's perceived geographic isolation should contain basic location facts that put the state in the center of the emerging economies of the Pacific Rim and western states.

Message 2: Oregon is a great place to live. The second major perception of survey respondents was very positive. Taken together, several separate responses provided a composite response on Oregon's quality of life and its various recreational opportunities (34 percent). These responses covered several topics such as the state's "casual lifestyle," "clean environment," "natural beauty," "low crime rate" and general safety as a place to live. The corresponding negative perceptions on this quality of life were very low; only three percent.

Message 3: Oregon has a diverse climate. The third set of perceptions, with the responses evenly balanced between positive (18 percent) and negative (20 percent), apply to the same topic: Oregon's weather. This poses an interesting dilemma: Do we reinforce positive perceptions or mitigate negative perceptions? The best approach is to educate people, about the state's diverse climate regions and how its weather compares favorably with other parts of the nation.

Message 4: Oregon is a profitable location in which to do business. The survey also asked corporate executives what their most important general location factors were in the site selection process. Four out the of five top-ranked responses involved industry-direct cost factors: labor (82 percent), site and building costs (79 percent), taxation (76 percent) and energy costs (63 percent). The only top-ranked response involving indirect cost was regarding community attitudes toward their company (see Message 5). These results indicate a need to promote Oregon as a low cost state in all of these categories when compared to other states. This is particularly true when Oregon's costs are compared to its nearest neighbors and chief competitors: Washington and California.

Message 5: We want your company in Oregon! This is the hidden criteria in any corporate decision-making process to relocate a facility in or out of state. The fourth-ranked general location factor in the survey, as noted above, was "community acceptance and attitude toward company" (72 percent). Only three percent of the survey respondents believed Oregon had an anti-business attitude, but this is an area where marketing can help the state's image. In this case the marketing of the state is a message on "attitude" in itself.

Notes: This project resulted in a seven-volume, 800-page publication completed at a cost of around $250,000. This paid for five economists, computer equipment, data purchased from Data Resources Inc., a nationwide survey conducted by GMA Research and information from Dun & Bradstreet. Costs were reduced by adapting targeting methodology from work done by Pacific Power and by hiring their staff economists.

Richard H. Carson is senior policy analyst in the Office of the Director of the Oregon Economic Development Department.

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