SESSION 9: TARGETING OF SECTORS AND MARKETS Mr. Sean M Duggan Director, ILSA Consulting 25 June 2012
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SESSION 9:TARGETING OF SECTORS AND
MARKETS
Mr. Sean M Duggan Director, ILSA Consulting
25 June 2012
7/28/2019 Targeting Sectors and Markets
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Overview of session 9
1. About targeting
2. Choosing targets – Targeting case example
3. Lessons and discussion issues
2
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1. About targeting
What is targeting?
DriversIncreasing competition among locations to
attract and benefits from FDI
PurposeGenerate high quality investment leads and
investment prospects
PrinciplesBased on private sector practices and
contemporary marketing techniques
ApproachWell researched and planned approaches to
investment decision makers (and advisers)
DeliveryConsistent concentration on targets (sectors,
functions, companies and source markets)
OutcomesGreater benefits from investors and investment
in the longer term
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1. About targeting
Evidence suggests targeting works!
4
Econometric evidence
• Targeted sectors receive more
than twice as much FDI as non-
targeted sectors in developing
countries (Harding andJavorcik, 2010)
• Targeting industries for
investment promotion leads to
an increase in FDI of 60%
(Charlton and Davis, 2006)
Location experiences
• Considered a key part of
Ireland’s success in attracting
FDI during the 1980 and 1990s
(MacSharry and White, 2000)• Restructuring Tunisia’s FIPA
from country to industry
targeting a key to success
(Mansour, 2005)
• Contributed to InvestHK's high
level of delivery and cost-
effectiveness (PwC, 2009)
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1. About targeting
Targeting advantages
•Focuses effort on the best FDI prospects
• Increases investors’ (and intermediaries’)
awareness of location, its offer and the IPA
• Investors react more positively to tailoring of
information and services
•Supports locations in the identification,
promotion and development of offer
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1. About targeting
Which targets?
Sectors/sub-sectorsISIC Sections = 21ISIC Divisions = 234
ISIC Classes = 413
Functions
HQ/RHQ, capital allocation
Research and development
Product design/developmentProduction and fabrication
Branding, marketing and sales
Storage, distribution and logistics
After sales service and support
Business enterprises82,000 TNCs (2008)
Different sizes
6
Business clustersLinks between sectors/sub-sectors,
functions and business enterprises
Source markets =
232
Top 20 markets =
86% of FDI
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1. About targeting
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Illustrations of sector targets?
10Czech Republic
(Czech Invest)Nanotechnology, Automotive, Aerospace,
Cleantech, Electrical engineering
Location (IPA) Targets Selected sectors/sub-sectors
11Ireland (IDA)Business services, Consumer products
Cleantech, ICT, Life sciences, Media
9Hong Kong
(InvestHK)Business services, Creative industries,
Professional services, ICT, Transport
20Singapore (SEDB)Aerospace, Chemicals, Healthcare, Marine
engineering, Precision engineering, ICT
9Jordan (JIB)Agro-Industries, Automotive, Chemicals,
Mining and processing, Pharmaceuticals
6Tunisia (FIPA)ICT, Electric and electronic, Mechanical,
Textiles, Food industry, Leather and shoes
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2. Choosing targets – Targeting case example
Pressure for change (1990s) – erosion of FDI
8
Location FDI
programme
New location economicdevelopment policy
priorities
Shifting patterns in FDI
– move to services
Relative decline in offer
competitiveness
Negative perceptions
of the location offer Rising investor
sophistication and
expectations
Increasing importance
of reinvestment Negative perceptionsof the existing FDI
programme
Agency divergence
from good practices
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Location supply
• offer
Location demand
• requirements
Location
market
2. Choosing targets – Targeting case example
A new approach (1999/2000)
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Targets
• sector/function
• source
Offer improvement
• awareness
• advocacy
Investor response
• awareness
• satisfaction
OpportunitiesRisks
(Net) profitability
InstitutionsSupporting infrastructure
Regulatory environment
AwarenessAttractiveness
Competitiveness
Business strategy
Investment drivers
Policy priorities
Development needs
Strategy Governance and organisation
Performance monitoringResources
Marketing and promotion
Investment
generationImage building
Investor
servicing
Aftercare and
Advocacy
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2. Choosing targets – Targeting case example
Identification of targets
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• Assessment of:• Business internationalisation trends
• Investor location requirements
(criteria and weighting) – overall and
sector
• Patterns of location decisions –
levels of mobility
• Investor (and broker) perceptions
• Stakeholder testing and opinion
• Assessment of:• Successful locations – features and
lessons
• Location competitors – targets,
positioning, value propositions
• Relative competitiveness as a
location – overall and sectors
• Location brand profile
• Stakeholder testing and opinion
Sector targets
Location supply
• offer
Location demand
• requirements
Location
market
Business strategy
Investment drivers
Policy priorities
Development needs
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2. Choosing targets – Targeting case example
Sector focused organisation structure
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Assistant Head
Sector Lead
Agency Head
Assistant Head
Sector Lead
Assistant Head
Special Projects
Investor Support Team
Sectors
Investor Support Team
Sectors
Investor Support Team
Special Projects
Investor Support Analysts
Sectors
Investor Support Analysts
Sectors
Investor Support Analysts
Special Projects
Marketing and
Communications
Corporate Services and
Administration
Overseas
Offices / Representatives
Strategy
Investor Support
Research
Corporate Services
Key
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2. Choosing targets – Targeting case example
Supporting investment database
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Market knowledge Investment project Offer proposition
• Sector description
• Main sector trends,
drivers and features
•
Market/industry issuesimpacting investors
• Major investing
business enterprises
decision makers in the
sector
• Level of expected
international mobility
of investment
• ‘Typical’ investment
project
process/requirements
•
Quantifiable aspects of a ‘typical’ investment
• Criteria influencing an
investors’ location
decision
• Criteria to assess
priority given to
potential investment
projects• Identification of the
most likely regional
rivals
• Location ‘offer’ position
of rivals
• Core proposition
arguments for location
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2. Choosing targets – Targeting case example
‘Virtual’ organisation – networks and partners
13
Investment Promotion Agency
Industry Department
Networks
FDI Steering Group
Overseas Trade
Offices
Trade Development
Agency
Economic
Development OfficesAmbassadors
Head Office
Overseas Representatives
Overseas Offices
Reflecting target
source markets
Brokers, investor
bodies, media,
Government
Government and
Private sector
Independent and
influential individuals
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2. Choosing targets – Targeting case example
Progressive rollout
14
Investor identification Investor approach
• Target enterprises (by
sector and source
market)
•
Initial long-list of enterprises
• Short-list based on
response
• Develop detailed profile
information – capture
on customer
relationship database
• General promotion
information
• Initial e-mail/phone
contact• Develop tailored
propositions
• Follow up presentations
and meetings
• Long term relationship
building strategy –
visits, events,
introductions
Investment assessment
• Criteria based to
determine level of
support and type of
handling response• Sector
• Additionality
• Displacement
• Net benefit
12-36 months
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2. Choosing targets – Targeting case example
Performance targets (illustrative)
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Process step Target description Target metric
Input context • Staff
• Expenditure
• Number (X)
• Budget ($)
Products, services and
activities
• Projects
• Leads
• > X
• > X
Investor • Perceptions
• Satisfaction
• > X% very positive
• > X% very satisfied
Outcome • Investment
• Jobs
• > X
• > X
• Performance targets clear and transparent and are aligned to strategy
• Emphasis is placed on targeting investors and outcomes
• Performance is reported publicly on a yearly basis
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2. Choosing targets – Targeting case example
Targeting refinement (2007/8)
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Desirable Sector targets Attractable
• Based on performance characteristicsof sectors using seven measures:
• Wage level
• Employment per enterprise
• Value-added per employee
• Capital invested per enterprise
• Industry size
• Industry growth
• Technology
• Based on relative sector strengths(revealed comparative advantage
analysis – industry performance
relative to OECD industry averages):
• Industry size
• Export size• Labor productivity
• Export specialisation
• Value-added
Location supply
• offer
Location demand
• requirements
Location
market
Business strategy
Investment drivers
Policy priorities
Development needs
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2. Choosing targets – Targeting case example
Revised sector targets (illustrative)
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‘Future goal’ ‘Core’
‘Bad fit’ ‘Quick win’
Motor vehicle sales and repair
Glass and ceramics
Wholesale trade
Construction services
Transport services
Retail tradeFood processing
Biotechnology
Aircraft manufacturing
Research & development
Publishing
Hotels, hospitality & tourism
Transport and logistics
Business support services
Furniture manufacturing
Ship building
Energy extraction
Telecommunications
Paper products
Rubber & plastics
Iron & steel
Financial services/BankingInformation technology
Pharmaceuticals
Supporting services
to air transport
Finance/Investment cos.
Education services
Harder EasierAttractability
Lower
Higher
D e s i r a b i l i t y
Priority
sectors
Longer-term
sectors
Key clusters
Key clusters
Key clusters
h l
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2. Choosing targets – Targeting case example
Revised source markets (illustrative)
18
Consistency
Low
High
Priority
marketsPortfolio of
secondary markets
h i i i h
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2. Choosing targets – OECD quantitative approach
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Variable Measure
Value-added
Share of value added of the sector
in total value added
Compound Average Growth Rate
(CAGR) of value added of the sector
over 5 years
Exports
Share of the sector in total exports
Evolution of the RelativeComparative Advantage of the
sector over 5 years
Cost of Labour
Labour cost advantage or
disadvantage in the sector
(benchmark: a cluster of emerging
countries)
World FDIs trends
Share of world FDIs inflows of thesector
CAGR of world FDIs inflows over a
number of years
FDI stocks in
CAGR of FDI stocks of each sector as
a percentage of GDP over a number
of years
Sector Attractiveness index
Variable Measure
Employment
Share of the sector in total employment
CAGR of employment of the sector over
a number of years
InnovationSector Innovation Performance Index
built on 12 OECD countries
Level of
complexity
Value added created per employee of
the sector
Country benefits index
2 Ch i OECD i i h
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2. Choosing targets – OECD quantitative approach
Country benefits Index
Agri
Fishing
Mining
Food
Textiles Leather
Wood
Paper Publishing
Coke, refined petroleum
products and nuclear fuel
Chemicals
Rubber and plastics
products (beneath real
estate)
Other non-metallic mineral
products
Metals
Machinery and equipment
Transport equipment
Electrical and optical
equipment
Electricity, gas and water
supply
Construction
Trade
Hotels and restaurants
Transport
Communication
Real estate, renting
Business services
0
5
10
15
20
25
30
35
40
45
50
0 10 20 30 40 50 60
Mean = 25
Mean = 27
70
70
Financial activities
The size of the bubble reflects the relative
share of FDI stocks
Ukraine, 2010
Sector attractiveness Index
2 Ch i OECD i i h
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2. Choosing targets – OECD quantitative approach
Median = 34
Agriculture, hunting
and forestry
Fishing,Leather and leather products
Papers
Coke, petroleum products , nuclearfuels manufacturing
Chemicals
Non-metallic mineral products
Basic metals and fabricated metal
products
Machinery
Motor vehicles &
transport equipment
Electricity, gas & water supply
Construction
Hotels & restaurants
Transport &
storage
Real estate
12
16
20
24
28
32
36
40
44
48
52
56
60
64
68
72
76
4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72
Communication
Trade & repairs
Rubber &
Plastic products
Finance
Food, beverages
& tobaccos
Electrical &
electronic equipment
Textile and textile products
Business & IT services
Geological services
Finance
Mining & quarrying
Country benefits IndexKazakhstan, 2009
Sector attractiveness Index
The size of the bubble reflects the relative
share of FDI stocks
2 Ch i t t OECD tit ti h
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2. Choosing targets – OECD quantitative approach
22
U k r a i n e ,
2 0 1 0
K a
z a k h s t a n ,
2 0 0 9
Quantitative
analysis of past
trends
Consultations and
Research
Stakeholders’
validation
•Oil/gas related sectors
and financial services
show high past
performance
•However, Kazakhstan
has capabilities and
endowments that could
be leveraged in
agribusiness, chemicals,
logistics or businessservices
•The government priority
is to diversify the
country and focus on
tradable and higher
value-added products
•The OECD suggests
focusing on specific sub-sectors
•Financial services and
metals show high past
performance
•However, Ukraine was
impacted by the
financial crisis and the
external shock on
demand for metals•Ukraine has capabilities
and endowments that
could be leveraged in
other sectors such as
agribusiness, aircraft
manufacturing,
renewables
•Priorities of the
government include
diversification frommetals, reducing
dependency on
imported natural gas,
improving value-added
productions
•The OECD suggests on
focusing on specific sub-
sectors
Agribusiness – beef,
grain and dairy value-
chains
Chemicals – fertilizers
Logistics – focusing on
agribusiness
Business Services
Agribusiness – grain
and dairy value-chains
Renewables – biomassvalue-chain
Machinery and
transport equipment –
civilian aircraft
manufacturing
Agreed targets
2 Ch i t t T ti l
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2. Choosing targets – Targeting case example
What not to do
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Location supply
• offer
Location demand
• requirements
Location
market
Targets
• sector/function
• source
Offer improvement
• awareness
• advocacy
Investor response
• awareness
• satisfaction
OpportunitiesRisks
(Net) profitability
InstitutionsSupporting infrastructure
Regulatory environment
AwarenessAttractiveness
Competitiveness
Business strategy
Investment drivers
Policy priorities
Development needs
Strategy Governance and organisation
Performance monitoringResources
Marketing and promotion
Investment
generationImage building
Investor
servicing
Aftercare and
Advocacy
No National
investment policy
statement
Overall programme
lacks coherence
Poordirection/support
provided
Lack of targets,
measurement and
reporting
Information is not
available or
difficult to access
Weak dialogue and
feedback12 sector targets
not evidence base
Inadequate
resources and
annual budget cycle
Little evidence of
advocacy and offer
improvement
Lack of strategy
implementation
3 L d di i i
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3. Lessons and discussion issues
Targeting is about more than targets
24
• Alignment of locationsupply and demand
• Focusing on appropriate
prospects
•
Promoting the location(and agency) to influence
behaviour:• Generate positive investor
responses
• Stimulate locationimprovements
• Coherence and consistency
of approach
Targets
• sector/function
• enterprise
• source
Promotion
programme
Offer improvement
• awareness
• advocacy
Location supply
• offer
Location demand
• requirements
Location
market
Investor response
• awareness
• satisfaction
3 L d di i i
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3. Lessons and discussion issues
Key lessons from experience of targeting
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Build on research andunderstanding
Targeting should use criteria built on marketknowledge – location demand and supply
Part of a coherent
programme
Combine as part of a wider programme
approach – with new and existing investors
Tailor to target needs Preparation and use of proposition based salesand promotional materials for use with targets
Include networksUses a wide range of partners including
government brokers and ambassadors
Sustained and persistentapplication
Long time engagement with networks to makeand sustain relationships – a “trusted adviser”
Apply learning principlesMonitoring to update market knowledge,
assess outcomes and enhance the offer
3 Lessons and discussion issues
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3. Lessons and discussion issues
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Key lessons from experience of targeting
But ... It doesn‘t guarantee success
Objectives
Research / DataPerformance
monitoring
Analysis
Programmedesign
Delivery
Tools /materials
Policy prioritiesDevelopment needs
Its an on-going process – the world changes
3 Lessons and discussion issues
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3. Lessons and discussion issues
Some key discussion questions
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ResearchWhat level of research have you undertaken to
understand the location market and sectors?
ProgrammeTo what extent do you have all of the
programme components in place?
ResourcesWhat information do you have available and towhat extent is it tailored to targets?
NetworksWhat networks are in place and how well are
they being used in practice?
ApplicationHow long has the targeting approach beenoperating?
LearningHow often is performance assessed and what
offer enhancements have been made?