Why Companies Come Here
(Oregon Business Magazine, February 1987)
By Richard H. Carson
A recent survey by the Oregon Economic Development Department reveals what really attracts companies to Oregon and what repels them.
A smart company that wants to evaluate consumer interest in its product is going to survey customers and not its sales representatives. This analogy holds true when the product is a geographic region trying to attract new industry and encourage local expansion. If you want to evaluate how to market a state or determine its economic strengths and weaknesses, you survey the potential industry customers about their needs.
With that concept in mind, the Oregon Economic Development Department (OEDD) has developed a new market research program, and we consider it one of the most advanced ever implemented by a state. The state's program has its roots in two different legislative mandates on industrial marketing and land use planning, but has far exceeded these requirements.
Traditionally the strategic elements of industrial marketing plans are leased on the experience of economic development professionals. Such plans are also traditionally questioned by elected officials because of their subjective nature. But through market research the department has intentionally created a baseline that represents industry trends and point of view.
The state's program is unique because the department has done its homework on its potential customers. First, the OEDD did a growth industries analysis of 358 different sectors. Then it surveyed 750 chief executive officers, presidents and other corporate decision-makers nationwide that represent the top ranked U.S. growth industries.
This was a stratified random sample survey, designed in consultation with the Portland advertising firm of Borders, Perrin & Norrander, and conducted by OMA Research Corporation with a reliability factor of plus or minus 3.6 percent. The survey asked industry 48 questions about what they consider to be important general and specific investment location determinants, how best to market an area to them, and what they thought of Oregon as an investment location.
The survey results on the top-rated general investment characteristics were:
- Labor availability costs 82 %
- Site and building costs 79%
- Corporate taxation 76% - Community attitude73% - Energy costs 69%
The OEDD has just completed a publication designed to address four of the five concerns that are related to the direct costs incurred by industry in each of the Pacific coast states. Oregon is very competitive in all four categories, but taxation is worth special mention. In a tax study done by the accounting firm of Arthur Andersen & Co. for the Washington (state) Research Council, the overall industry tax cost was lower in Oregon for 96 percent of the industry categories when compared to Washington and was lower in 71 percent of the categories in a comparison with Washington and California.
The survey results for the top-rated specific investment location requirements are also very important in determining the competitive advantages of Oregon's communities. The survey results are good news for Oregon's smaller communities and the findings will provide new insight for local economic development efforts. The survey respondents indicated that 50 percent preferred a "small town" as an investment location, while 45 percent preferred a "metropolitan" area. These results were very close to the results on preferred community size where 55 percent wanted communities with a population of less than 50,000 and 38 percent wanted a community of over 50,000. The planned employment at a proposed facility is also of interest to smaller communities since 71 percent would employ less than 50 people and 25 percent would employ more. This directly relates to the 75 percent who wanted industrial sites of five acres or less and the 19 percent who wanted more than five acres.
The industry transportation requirements indicate that 40 percent of the respondents wanted access to an interstate highway, 31 percent wanted to be near an inter-national airport and 29 percent wanted to be near a regional commuter airport. The highest rated educational requirement was the need for community colleges.
The survey also asked industry what appealed most and least to them about Oregon as an investment location. The single largest response in either the positive or negative perceptions was that 30 percent of the respondents felt that Oregon was isolated from the rest of the country and not centrally located. The second-ranked negative perception was that 20 percent didn't like our climate. This is especially note-worthy since 18 percent ranked climate as our number one attribute, followed by recreational opportunities at 8 percent. The characteristics that we Oregonians might believe to be negative all ranked below 2 percent. This includes a "visit, but don't stay" attitude.
These survey results on industry's perception of Oregon have direct implications for the OEDD's industrial marketing plan. The plan will translate the market research findings into a set of strategic implementation programs and messages to promote Oregon as a desirable location for business investment.
The real estate maxim of "location, location, location" spells out the major perception problem about Oregon. Thus, promotional efforts must be directed at this image problem. For example, the message regarding Oregon's perceived geographic isolation could contain three basic location facts that put Oregon in the center of the world's new economy:
Location Fact #1. The book Megatrends tells us that nine of the top ten population and income growth states are in the West and that this trend is "virtually irreversible in our lifetimes."
Location Fact #2. Oregon is located next to what is currently the seventh largest economy in the world, and is projected to be the fourth by the year 2000 California. We are within two hours flight time or one day by truck or rail.
Location Fact #3. America's trade with Asia is almost one-third of the total U.S. world trade of $556 billion and is way ahead of Europe as a trading region. Some 70 percent of this Pacific Rim trade flows through the Pacific coast states.
In addition to the survey the department's research project features five other components: the "Business Growth/Decline Study" that shows expansion and contraction of 123,000 businesses in Oregon between 1979 and 1985; a "Growth Industries Report" that uses state and national economic data to rank industries according to their growth potential; "Growth Industry Profiles" that provides details on 30 of the top-ranked growth industries; the "Industrial Marketing Plan" that outlines the OEDD's strategy for business retention and recruitment programs; and the "Local Development Program Guide" that is designed to help local officials use the data base.
Richard H. Carson is the manager of industrial properties with the Economic Development Department and author of the recently released publication titled "Locating the Factories of the Future: A Survey of Determinants of High Technology Facility Siting."