Industrial chain investment promotion is a key strategy for driving regional economic development and optimizing industrial structures.
Drawing on the 14 years of practical experience in investment promotion accumulated by Guchuan United, we are currently compiling insights and case studies on industrial chain investment promotion to lay a solid foundation for the publication of a related book.
Today, we are sharing a special excerpt from the book, hoping it will be helpful for your investment promotion efforts. We also welcome your valuable suggestions.
Project Identification — Analysis of Corporate Investment Needs
Investment promotion must not only be driven by our own needs but, more importantly, by the needs of enterprises. Only by putting ourselves in their shoes and understanding both our own and their perspectives can we allocate resources scientifically and implement projects efficiently.
Reasons for Corporate Site Selection
Many investment promotion professionals may have this question:
We are the government, not the enterprise—why do we need to understand knowledge related to corporate site selection?
From the perspective of investment location selection theory, investment promotion involves the government guiding enterprises to settle in a specific region; however, for the enterprise, this process is the process of site selection.
As the saying goes, "Know yourself and know your enemy, and you will never be defeated in a hundred battles."
Why do companies choose a location? What factors do they consider during site selection? What is the site selection process like? What challenges might they encounter? What actions and decisions need to be made?
Only by truly practicing empathy—thinking from the company’s perspective and understanding their key needs for investment and site selection—can we accurately meet their requirements and facilitate the successful implementation of projects.
From a business perspective, the reasons for site selection can be summarized as follows:
1. Investment and Establishment
This typically occurs during a company’s startup phase, where cost savings and rapid profitability are the primary goals. Consequently, businesses place greater emphasis on the market and industrial environment, and prefer property types such as incubators and factory spaces that offer low rent and a relatively mature industrial ecosystem.
Example: A company originally started as a family-run business selling plant-based meat and vegetarian products. Due to excellent product reputation and increasing market demand, the family workshop could no longer meet sales volume. They first partnered with a contract manufacturing facility for mass production. After market validation, sales gradually increased. The children then conceived the idea of investing in their own factory for in-house production and direct sales, and began searching for suitable industrial properties. For investment projects transitioning from small workshops to the startup phase, capital is limited but the prospects are promising.
2. Production Expansion
Companies are typically in the growth stage. Having completed their initial accumulation, they begin to consider factors such as corporate image, brand strength, employee benefits, and the work environment, and are able to afford higher site selection costs.
In terms of property types, they trust industrial parks with high visibility, mature industries, comprehensive supporting facilities, and comprehensive talent services, but are more inclined to build new factories in the same area as their existing facilities.
3. Establishing Additional Plants
This is typically a strategic investment by large enterprises. With the local market already saturated, companies select locations based on external market strategies, paying close attention to government administrative efficiency, preferential policies, geographical location and transportation, industrial infrastructure, and labor supply.
Regarding property types, large enterprises tend to purchase land and build their own facilities, while foreign-invested enterprises and SMEs prefer to lease space in established industrial parks. It is worth noting that downstream enterprises often follow closely behind.
4. Strategic Relocation
These enterprises are significantly influenced by national political, industrial, and trade factors. They tend to seek proximity to more mature industrial environments and sales markets or pursue lower production and operating costs.
At the same time, such enterprises typically relocate across regions; their evaluation and decision-making cycles are relatively long, generally lasting 1 to 3 years, and they place significant emphasis on factors such as land prices, labor costs, tax breaks, and preferential policies.
In terms of property types, enterprises either lease factory space to begin production quickly before acquiring land to build a facility, or they acquire land directly to construct a factory.
5. Policy-Driven Factors
The site selection for these enterprises is constrained by policies in their original regions, such as those for high-pollution, high-energy-consumption, or low-value-added enterprises. These enterprises place greater emphasis on preferential policies, such as tax policies, industrial support policies, and trade subsidies. For example, relevant policies in Khorgos, Xinjiang, and Hainan hold strong appeal for enterprises.
6. Industrial Cluster Factors
These enterprises are typically supporting businesses within an industrial chain. They prioritize locations within industrial clusters or areas surrounding core cities, striving to integrate into the upstream, midstream, and downstream segments of the industrial chain.
As long as a business operates within the value network of the industrial chain, it will benefit from it. When this network expands, the business’s supply and demand will increase, enabling continued upward growth.
Factors Influencing Corporate Site Selection
When selecting a location, companies often consider areas with convenient transportation, relatively low labor costs, or well-developed supporting infrastructure. The factors considered vary by industry, and different types of companies prioritize different aspects.
To attract investment effectively, one must understand the key decision-making factors behind corporate site selection in order to address the core issues and provide targeted solutions. What exactly are the factors influencing corporate site selection? We will analyze this using a corporate site selection decision-making model.
The corporate site selection decision-making model draws inspiration from the “Porter Diamond Model,” which features a square and a circle representing internal and external factors, respectively. In the site selection process, internal factors include corporate strategy, demand conditions, production factors, and related and supporting industries, while external factors encompass government and opportunities.
1. Market Conditions
Market conditions essentially constitute the market itself and are the most fundamental factor in corporate site selection. When a company invests in a specific region, whether its products can adapt to the local market environment determines the company’s survival and development in that area. Market demand, market competitiveness, and market potential are of particular concern to companies.
Example: Suppose there is a local automotive manufacturer A, as well as two auto parts companies, B and C. If auto parts company D wishes to enter the market, it must first consider its own market potential and market competitiveness in this region.Can it leverage new product upgrades or price advantages to establish a strong competitive edge against Companies B and C and capture market share? If the high costs of construction and operations result in no room for growth, it would be better not to invest at all.
Investment promotion staff can assist companies with industry analysis, market capacity analysis, and competitiveness analysis, using data and experience to provide quantitative support for site selection decisions, strengthen the company’s confidence in investment and site selection, and accelerate the decision-making process.
2. Opportunities
For example, explosive market growth or government policies—whether encouraging or restrictive. At different stages, the government identifies industries to support, such as new energy vehicles.
When the government introduced relevant planning policies to regulate metrics like vehicle numbers and energy consumption, investors recognized that new energy vehicles represent a promising future industry and quickly entered the sector to start businesses.
In this process, many traditional automakers have launched their own new brands, giving rise to numerous rising stars. For instance, GAC Aion has shone brightly against this backdrop, a clear demonstration of the influence of opportunity factors.
Therefore, investment promotion personnel must continuously explore the future direction and trends of the industry to accurately assess a company’s future opportunities and challenges when engaging with businesses.
3. Corporate Strategy
We frequently hear news such as: “A certain company plans to enter foreign markets this year,” or “A certain company will realign its products in a specific direction this year.” Every corporate decision is closely tied to strategic planning. Once a strategy is formulated, it exerts a significant influence on the company’s investment activities.
Example: A company plans to expand its product presence into Southeast Asia or the Japan-Korea region. It will subsequently establish basic trading or manufacturing companies in these target areas to control costs and promote efficient growth.
Therefore, investment promotion professionals must fully consider strategic factors. First, they should focus on understanding the company’s development direction—for instance, if production capacity is set to increase from 1 billion to 2 billion within five years, the need for new locations to accommodate this expansion will inevitably follow.
Second, corporate strategy is also reflected in regional布局 based on competitors’ performance, such as Suning versus Gome, or KFC versus McDonald’s. If investment promotion staff can gain insight into these strategic considerations, they will undoubtedly gain a competitive edge in attracting investment.
4. Related and Supporting Industries
For example, a company plans to relocate from Shanghai but is only considering areas within a half-hour drive of the city.
Through in-depth research and analysis, investment promotion personnel explore the underlying reasons behind the company’s distance requirements:
First, relocating too far away could lead to significant changes in production factors, such as employee turnover; second, most industrial support facilities are concentrated around Shanghai. If the company relocates to an area far from Shanghai or the Yangtze River Delta, it will inevitably lose many of its existing resources in related support industries.
Therefore, the true factor influencing the company’s site selection decision is not the city of Shanghai itself, but rather the supporting industrial and supply chain infrastructure.If areas more than a half-hour drive from Shanghai can address this issue, companies would not completely rule them out.
5. Production Factors
All companies consider the costs of factors such as raw materials, labor, and logistics, as well as the use of natural resources like hydropower, wind power, and electricity.
Investment promotion staff must learn to crunch the numbers for companies, allowing them to fully appreciate our professionalism and sincerity.
6. Development Environment
A company’s development is closely tied to local policy support and the administrative environment.Companies also consider the reverse scenario: even if investing locally offers lower costs and more comprehensive supporting infrastructure, a poor local administrative environment would deter them from investing there, given future development considerations.
Therefore, when engaging with companies, investment promotion staff must communicate efficiently, respond quickly to their needs, and earn their recognition through high-quality service.
The above outlines the key factors influencing corporate investment site selection. To help deepen your understanding, let’s examine an example.
Case Study: Analysis of Great Wall Motor’s Vehicle Manufacturing Site Selection
Great Wall Motor’s vehicle manufacturing base project was ultimately located in Rizhao, Shandong. The factors influencing this decision are analyzed as follows:
(1) Analysis of Requirements
Great Wall Motor possesses strong foresight. Through data analysis, the company predicted the inevitable trend of consumption upgrading in the domestic automotive market. Combined with Great Wall Motor’s need to expand sales in international markets, the company launched a product series targeting the mid-to-high-end market against this backdrop.
As Great Wall Motor has expanded its international footprint in recent years—such as acquiring factories in Thailand and India and establishing a vehicle manufacturing base in Russia—its growing export demand has become a key factor in determining future location decisions.
(2) Analysis from the Perspective of Opportunities
For Great Wall Motor, opportunities manifest in three areas:
First, a significant opportunity to “overtake competitors on a curve” in the new energy vehicle sector. The state encourages the development of new energy vehicles, and Great Wall Motor possesses strong growth potential in this field;
Second, opportunities arising from the shakeout in the traditional automotive industry.As is well known, in 2019, many automakers competed on price, and many companies lacking core competitiveness faced the threat of bankruptcy. Under these circumstances, while production capacity increased, leading companies either expanded their market share or dominated a significant portion of the market. As a leading state-owned brand, Great Wall Motor has substantial opportunities;
Third, ample opportunities for capacity expansion. Great Wall Motor’s technological reserves, brand strength, and international market presence provide the company with ample opportunities for capacity expansion.
(3) Analysis from four dimensions: corporate strategy, production factors, related and supporting industries, and government support.
Why did Great Wall Motor choose Rizhao rather than other regions with stronger urban competitiveness?
First, consider corporate strategy. Great Wall Motor’s strategy comprises a benchmarking strategy and a globalization strategy, both of which require corresponding port or freight rail support. This is a necessary condition for site selection.
Second, consider the production factors. An abundant labor force and a location with both port and rail access are essential requirements for Great Wall Motor’s site selection. Investment promotion staff conducted thorough research and evaluations of the labor resources at various skill levels required by Great Wall Motor, as well as the local transportation infrastructure. By drawing a clear contrast with competing regions, they highlighted Rizhao’s advantages and sparked Great Wall Motor’s interest in locating there.
Third, consider the supporting industries. The catalytic effect of vehicle manufacturers on the automotive industry is very evident; for example, if Great Wall were to establish operations locally, corresponding Tier 1, Tier 2, and Tier 3 suppliers would follow suit. Although Great Wall Motors does not place particular emphasis on supporting infrastructure, the presence of such a foundation would leave a favorable impression on the company.Therefore, when Great Wall visited Rizhao, the itinerary specifically included visits to two companies—Weiya Engine and Pivot Transmission—which subtly created a favorable first impression for the delegation.
Fourth, government policies. In terms of policy, the local government ran the numbers.
First, the economic calculation: for example, what economic benefits would Great Wall’s establishment in the area generate?
Second, the social benefits: for instance, how would Great Wall Motors’ establishment in the area boost employment and foster the development of technical and research talent?
Third, the benefits to the industrial chain: for example, what impact would Great Wall Motors’ presence have on the local automotive industry? By conducting these analyses, the local government gained a clear understanding of the sources of these benefits.
In addition, the local government also ran the numbers for the company: exactly what costs could Great Wall Motors save by locating in Rizhao, and by how much?Through these calculations, even if some policies are on par with those of competitors, the local government can clearly highlight its own advantages and thereby win the company’s approval.
The corporate site selection model plays a crucial role in analyzing a company’s location decisions. Investment promotion personnel must fully understand corporate needs, identify the core factors in a company’s site selection process, and engage in in-depth thinking, analysis, and research to gain a thorough understanding of the company, ultimately attracting the project.
