Your site selection study: 28 qualitative criteria for success
So you want to grow your business in Europe, but aren’t sure how to find the best site for your new venture.
We suggest you start by evaluating key success and risk factors for each candidate destination.
While most project teams are skilled at analyzing financial criteria, assessing qualitative criteria is tougher. Yet overlooking or underestimating qualitative factors will make it harder to set up your new venture—and may well undermine its performance.
We can help make your site selection study a success.
In this article, we’ll examine 28 qualitative criteria in 6 categories:
- overall environment
- ecosystem and innovation
- quality of life
- openness to the world
1. Political and social stability of the host country
The host country’s political and social environment is the first qualitative criterion to consider.
You’re making a long-term commitment, so it’s important to consider the risks of a regime change or political shift.
Could a different party take power and adopt policies that would hurt your business? If you’re investing in 5G, could a future leader impose a multi-year moratorium? And how will Brexit affect businesses in the UK?
As you evaluate prospective sites, be sure to include these kinds of risks.
Labor relations is another key issue. What are the risks of labor unrest in your candidate region? How would widespread strikes affect your business?
2. Monetary stability
Monetary stability is another important factor in site selection.
High inflation creates uncertainty and weighs on economic activity, making it harder for businesses to plan investments and make decisions. Inflation also raises interest rates, which makes investments harder to finance.
Note that deflation is bad for business too. As prices fall, companies lose income and are forced to fire workers, slowing demand.
3. International image of the “Made in X” brand
If your site will export to international markets, your host country’s global brand is an important consideration.
For example, the “made in France” label is often associated with expertise. Consumers view it as a sign of quality.
In sectors from luxury goods and aeronautics to wines and spirits, French origin is recognized around the world.
4. Efficiency and reliability of the host country government
As you launch your new venture, you’ll need to work with the government of your host country. Endless red tape and widespread corruption can cost you time and/or money.
Though France is sometimes criticized for cumbersome government formalities and paperwork, this reputation is undeserved. In fact, the French government is going all out to make it easier for you to do business here. According to a World Bank study, it takes only 4 days to launch a company in France—a record low for the European Union.
5. Risk of natural disaster
The success of your new venture hinges on the long-term viability of your site, so it’s important to assess the risk of natural disasters in your candidate regions. What are the chances that they will be hit by floods, fires or earthquakes?
France has some of the best documentation anywhere for this type of risk, including information on local urban planning and risk prevention.
6. Proximity to education programs for your industry
Be sure that your host region will have an adequate supply of graduates with the right skills—not just today, but over the medium and long term.
One key to success is the presence of universities and institutions of higher learning that produce the talent you’ll need to grow.
7. Number of graduates per year
This goes hand in hand with our last point: can your host region provide enough new employees to meet your staffing needs?
8. Occupational training centers for your industry
In addition to graduates of universities and institutions of higher learning, you’ll need workers with the right training for your business. Make sure that your candidate region has training centers for the know-how you need.
9. Number of jobseekers
If you choose a region with full employment, staffing can be a challenge. To attract the best people, you’ll probably need to pay more.
By contrast, recruitment takes less time and money in a location with a larger population of jobseekers.
Bottom line: don’t limit your research to the overall unemployment rate. Be sure to include the number of workers seeking jobs in your industry.
10. Number of employees working in your industry
It’s important to choose a region that already has the right culture. If you’re in the auto industry, for example, you’ll be up and running faster if you can recruit employees who already work in your field.
11. Flexibility of the labor force
If your industry has specific production needs, your costs and scheduling strategy may depend on the flexibility of the local workforce. Your data should include:
- Length of workweek
- Scheduling flexibility
- Night and weekend hours
- Days of vacation per year
12. Average annual turnover
High staff turnover means higher recruitment costs. But you’ll also have trouble finding employees if turnover is extremely low in your target region.
Here again, you should be specific: focus not only on the overall figure, but on turnover for your industry.
13. Number of competitors in similar lines of business
As you conduct your site selection study, you should also consider the number of competitors already doing business in your candidate location. A crowded field can slow recruitment and trigger bidding wars as businesses scramble to attract the best talent.
14. CO2 emissions from electricity generation (T/MWh)
As corporate social responsibility (CSR) performance becomes more important, it’s increasingly likely to affect your corporate image and your employer brand.
Under French law, for example, all companies with over 500 employees must publicly report their carbon footprint every 4 years. And although the regulatory environment is still fairly relaxed, the trend is toward decarbonization.
15. Reliability of the power grid
The continuity of your business depends on the continuity of your power supply. An unreliable grid is a drag on your site’s production and business performance.
16. Quality of telecommunications
In today’s world, every business communicates by telephone, over the Internet and by e-mail, and some apps are available only in the Cloud. This makes good network coverage essential, and high-speed networks are an undeniable advantage.
17. Quality and diversity of transport infrastructures
The ideal site should offer logistics you can trust. The quality and diversity of transport infrastructures are vital in getting raw materials and semi-finished products in, and sending finished products out to resellers or consumers.
Will you need access to airports, ports or highways near your sites? If so, within what radius?
Quality of the local ecosystem
18. Number of potential suppliers and subcontractors
Your venture will be more agile if you can count on reliable partners to meet your needs.
As you analyze candidate sites, be sure to assess the potential of their regional ecosystem. That will tell you in advance what you can subcontract locally and what you’ll need to bring in from the outside.
19. Number of R&D centers and their specializations
R&D is critical to your competitiveness. In the automotive industry, for example, electric battery research is shaping the cars of tomorrow.
You need to know in advance whether you can rely on local R&D centers. If not, you’ll have to bring your research and development effort in-house.
20. National and/or regional policies supporting your business
Support from local and national government is a powerful asset for your business.
As we’ve seen, political shifts can be a risk for some industries, but support for targeted sectors can be a major opportunity.
In France, for example, policies supporting electric vehicles are opening new horizons for automotive companies.
Quality of life
21. International schools
When you launch a new venture in another country, you need to recruit local talent.
But you also need expats from your home country and/or international candidates with a proven track record at other sites around the world.
In either case, at least some of your employees will come from outside the host country, and they and their families need the right quality of life to thrive. Which makes international schools that can enroll their children another criterion for your site selection process.
22. Quality of the local health system
The quality of the local health system is also important in attracting the right talent to a foreign country. Employees may be unwilling to relocate to a country with inadequate medical care: if any major health problem means emergency repatriation, candidates will think twice about joining your team.
23. Air quality
No one wants to breathe dirty air or raise their children in a polluted environment, and this has obvious consequences for recruitment. The Air Quality Index (AQI) is a good way to assess your candidate sites.
24. Cost of residential real estate
Whether you’re renting or buying, real estate prices affect the appeal of a region. In the interest of your workforce, look for a region that strikes a good balance between advantages (such as services, schools and retail) and housing costs.
Openness to the world
25. Quality of air and rail connections
We’ve already mentioned the importance of good transport infrastructure for logistics. But you should also consider ease of travel by team members between the new site and your headquarters, as well as other units within your company. Having rapid air and rail service nearby is a huge benefit.
26. Number of companies from your country already doing business in the region
Relocating to an unfamiliar country with a very different culture can be a challenge. Having a community of people from your home country can make you feel less homesick, and you’ll learn from the experiences of fellow expats in your host country.
27. Satisfaction rate among foreign companies doing business in the region
You’re still working through your site selection process, but other foreign companies have already completed the process of launching a new venture. Getting feedback from them can clarify your thinking, and you’ll learn from their successes and failures.
28. Ease of obtaining visas and residence permits
Good working relationships between expats and local employees is critical to success, and expats are essential to teaching operating procedures and building corporate culture.
That means employees from outside the host country need to be able to reach your new site easily and stay there for varying lengths of time. Be sure to check requirements for visas and residence permits, and find out how long it takes to get them.
These 28 criteria are a valuable starting point for your site selection study, but of course you can adapt our list and weight the various factors based on your line of business and your company’s specific needs.
Our qualitative decision matrix can help you make a thorough, accurate assessment of your candidate regions and avoid leaving anything out.