5. Culture: ability of the location to attract talent, measured by the accessibility of airlines, railroads, and highways; macroeconomic factors such as the level of political stability, inflation, government policies supporting R&D, and bureaucratic red tape; and quality of life, including standard of living, schools, safety, pollution levels, climate, entertainment, and the presence of an expatriate community. By way of illustration, many European companies, such as Volkswagen, Siemens, Faurecia, and ABB, have established R&D centers in eastern Europe, although costs there are higher than in other developing countries. The lure is primarily cultural: a shared history and neighborhood, the same or nearby time zones as those at headquarters, and excellent transportation infrastructure.
Although the five Cs are of the utmost importance, there is another C that should not be overlooked — the customer. To be close to exploding consumer markets, companies often find that opening engineering and product design facilities in China and India, for example, is essential. In those cases, even after completing a conventional five C analysis, companies for which the customer base is crucial may find that this gives them a smaller number of cities to choose from. But that constraint must not deter companies from choosing a location primarily based on the five C factors. Whatever the region, in today’s globalized environment, more than a few cities will manifest each of the best characteristics to match a company’s needs.
Reprint No. 10403
- Ajay Chamania is executive vice president and global head of product engineering services at Patni Computer Systems, an IT services firm based in Mumbai, India.
- Heral Mehta is a senior associate with Booz & Company based in Mumbai. She specializes in the automotive and industrials sectors in emerging markets.
- Vikas Sehgal is a partner in Booz & Company’s global engineered products and services team, based in Chicago. He specializes in emerging-markets strategy, product strategy, engineering globalization, and policy formulation.
- Also contributing to this article was Booz & Company Principal Sunil Sachan.