Fabrice Hatem, Invest in France Agency, La Baule, World investment Conference 30 June 2005 How European countries are competing to attract business support

Fabrice Hatem, Invest in France Agency,La Baule, World investment Conference30 June 2005

How European countries are competing to attract business support

functions

© AFII 20052, avenue Vélasquez75008 Paris

The stakes are high

Businesses operate using different functions, not just production, but also logistics, R&D, etc.

Multinationals structure their international networks to capture the specific advantages of different host areas

This strategy extends to all functions, which have thus become internationally mobile…

… with the result that countries are competing to host these functions


The source data : the AFII data base

FDI data have a limited usefulnessy : they mix up MA/greenfields, give no information on the business function involved, etc.

Necessity to collect new types of data : informations on individual international projects carried out by multinationals companies

Sources : international press, the web, promotion agencies, companies…

Ex : Ernst and Young (EIM), IBM/PLI (Gild), Invest in France (AFII)

AFII Data base : each project is described by about 20 parameters

One possible use : analyze the investment trends for a specific corporate function (e.g : R&D, logistics, call centres, headquarters, etc.)


Business support functions : already a big market in Europe

58% of projects, 25% of jobs between 2002 and 2004

Smaller average size in terms of jobs than plant-related projects

Major structural impact on the host country

Per worker skills and wages higher than in production jobs

Do not confuse business support or tertiary functions such as R&D or call centers with tertiary sectors like banking – another area where international investment is growing


Projects, average number of jobs, 2002-2004

0

50

100

150

200

250

Pro

duct

ion

Cal

l cen

tres

and

onlin

ese

rvic

es

Dis

trib

utio

n,lo

gist

ics

Oth

erse

rvic

es

Inte

rnal

adm

inis

trat

ion

and

HQ

serv

ices

R&

D c

entr

es

Sal

es a

ndlia

ison

offi

ces

Tot

al


Functions, by number of projects 2002-2004

5%

31%

5%

2%6%9%

42%

Other services

Sales and liaison offices

R&D centres

Call centres and online services

Distribution, logistics

Internal administration and HQservices

Production / manufacturing


Functions, by number of jobs created2002-2004

4%

2%

3%

5%

6%

5%

75%

Other services

Sales and liaison offices

R&D centres

Call centres and onlineservice

Distribution, logistics

Internal administration andHQ services

Production / manufacturing


Every sector of activity is affected

Large overall proportion of service sectors (because of outsourcing, nature of activities)

R&D: pharma and electronics

Logistics: manufacturers, distributors, service providers

Call centres: importance of service sectors

SSCs, HQs: broad sector diversity


Aggregate job creation in support functions in Europe

by sector, 2002-2004

20%

18%

13%11%

7%

5%

26%

Other commercial and financialservicesConsulting, engineering,corp.services Elec, IT and medical equipement

Software and IT services

Automotive

Pharma

Other


Proportion of jobs created in support functionsby sector, 2002-2004

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Telecom and internet operators

Other commercial and f in. Services

Consulting, engineering, corp. services

Softw are and IT services

Transport, w arehousing, construction

Elec., IT and medical equip.

Agrifood

Pharma

Total

Furniture and home appliances

Chemicals, plastics, biotech

Consumer electronics

Electronic components

Textile, apparel

Other transport equipment

Mechanical machineries and equip.

Automotive

Metal, metal w orking

Other basic industries


Proportion of jobs created in R&D by sector, 2002-2004

27%

21%

15%

11%

6%

4%

16%

Pharma

Elec, IT and medical equipt

Automotive


Chemicals, plastics,biotech

Electronic components

Other


Proportion of jobs created in call centres by sector, 2002-2004

34%

22%

17%

11%

7%

3%6%

Other com. and fin.services

Consulting, engin, corp.services


Telecom and internetoperators

Elec, IT and medicalequipt

Transport, warehousing,construction

Other


Proportion of jobs created in HQs and CSPs by sector, 2002-2004

18%

15%

12%

12%

9%

7%

27%


Elec. IT and medical equipt

Other com. and fin.services

Consulting, engin., corp.services

Automotive

Pharma

Other


Proportion of jobs created in logistics by sector, 2002-2004

30%

19%14%

10%

8%

4%

15%

Autres serv. commerc.ou financiers

Conseil, ingén. et serv.aux entrepr.

Ameublement etéquipement du foyer

Automobile

Transport, stockage,BTP

Agro-alimentaire

Autres


US and UK firms play a prominent role

US and UK firms enjoy a large share of projects

Role of service sectors in home economies

These companies played a lead role in managerial and commercial developments linked to support functions (development of SSCs and call centres)

US firms currently restructuring support functions (R&D, HQs) in Europe


Jobs created in support functions by source region, 2002-2004

0%10%20%30%40%50%60%70%80%90%

100%

R&D cen

tres

Call c

entre

s

Logist

., dis

trib.

Adm. S

erv.

HQ

Total s

upport

Product

ion

Total

Other

Japan

Other Asia

Other West. Europe

Sweden

France

Germany

UK

North America


Could Western Europe lose its shine?

Western Europe accounts for most of the job creation in support functions

Support functions in turn account for a high proportion of job creation in Western Europe

The British Isles boast especially strong appeal

Reasons: stand-out business environment, location near production sites and existing markets

But a shift has begun towards the east (development centres) and even towards the Mediterranean (call centres)


Job creation, by function and host region, 2002-2004

0%

20%

40%

60%

80%

100%

Eastern Europe WesternEurope

Adm. Serv., HQ

Production

Distrib., logist.

Call centres

R&D centres

Sales offices

Others


Job creation, by host country and function 2002-2004

0%10%20%

30%40%50%60%70%

80%90%

100%

Sales o

ffices

R&D cen

tres

Call C

entre

s

Logi

st., d

istrib

.

Adm. S

erv.,

HQ

Tota

l sup

port

Produ

ction

Tota

l

Other East. Eur.

Poland

Hungary

Czech Rep.

Other West. Eur.

Germany

France

Spain

Ireland

UK


Business location criteria and country advantages

R&D: the west offers the best sites for research, but the east can provide a high-quality workforce for development-side projects

Call centres: an eastward, even southward, shift is now underway

HQs, SSCs: new cities are emerging as business locations in western Europe, e.g. Barcelona as a base for regional HQs covering southern Europe

Logistics: European markets still exert a pull in terms of downstream activities, but upstream components are beginning to follow the production networks eastward

Documents

Fabrice Hatem, Invest in France Agency, La Baule, World investment Conference 30 June 2005 How European countries are competing to attract business support