Balancing Site Selection Criteria

May 2, 2007
Executives cite strategic location and positive investment climate among the reasons to choose Ontario, Canada.

Editor's Note: "Look to Ontario" is a three-part series describing Ontario, Canada's recent efforts to build upon the province's competitive advantages as a manufacturing center, including its highly skilled and educated workforce; attractive investment climate and central location; and reputation for high-quality production and innovation. This is Part 3. Also see Why Isn't Ontario, Canada Facing a Skilled Labor Shortage? and Knowledge Networks Feed Manufacturing Growth.

Identifying a location for a new manufacturing facility is a balancing act: You have to find that "sweet spot" where myriad factors combine to work to your company's competitive advantage, now and in the future. You need a cost-competitive location, but you must be close to key customers and growing markets. You need a skilled and educated workforce, yet you must keep labor costs in line. You must weigh the city, state/provincial, and national economic development incentives against their regulations and tax structure. You need access to information and transportation infrastructure, but the taxes can't be onerous.

Increasingly, you need to find the intangible: an innovative culture that is difficult to define but by proxy is found in areas where universities, research facilities, and leading-edge companies converge to form industry "clusters." And, in the new global economy, you must literally search the world for jurisdictions that meet your needs.

For many multinational companies who've recently made a location decision, Ontario, Canada, was their destination of choice. "We're an international company with the world to choose from, but we selected Ontario for our new $965 million investment because, quite simply, it's the ideal location from which to grow our business," says Linda Hasenfratz, CEO, Linamar Corp. "The province provides a wonderfully innovative environment, proximity to our customers and a supportive government."

The list of companies choosing Ontario for new facilities and expansion is a "who's who" of multinational industry leaders in the auto, life sciences, information communications technology (ICT) and advanced manufacturing industries. Toyota, GM, Ford and DaimlerChrysler... GlaxoSmithKline, Amgen, AstraZeneca and Baxter... Nortel, IBM, Alcatel and Dell... ABB, Northrop Grumman and RNA Automated Systems to name a tiny fraction of the companies with operations in Ontario. During the past ten years, foreign direct investment in Ontario has climbed as multinational companies recognized the advantages of doing business in Ontario. Key factors executives cite to explain their decision include Ontario's central, strategic location in the world and its positive investment climate.

Location, Location, Location

As when buying a house, the value of your investment can dramatically be influenced simply by its proximity and access to other desirable places, and Ontario's geographic location is a natural advantage. To start, Ontario is part of a huge (420 million people), affluent (U.S. $13.8 trillion GDP) North America Free Trade region where products move freely across borders. The province shares 15 border crossings that are integrated with the U.S., which facilitates just-in-time delivery.

Further, Ontario has three international airports; the largest is Toronto's Pearson International, where more than 65 airlines provide daily service to 43 cities in the U.S. and 42 cities abroad. The Great Lakes St. Lawrence Seaway, accessed via 40 provincial and interstate highways and nearly 30 railway companies, provides passage for large ocean-going vessels.

Positive Investment Climate

A perfect location, however, only gets a jurisdiction on the short list; it also must be a good place to do business. In Ontario, streamlined regulations and a world-class infrastructure enable companies to move quickly from plan to production. The necessary infrastructure -- buildings, transportation, telecom -- is in place, and business start-ups require just two simple steps, compared to as many as 20 in other industrialized countries "We were able to lease a facility that fit the bill and have it fully operational in just four and a half months. That's record time," says Hiroyuki Omori, president of Hino Motors Canada. Also, fast-track immigration for key employees delivers work visas within days.

In addition, Ontario maintains a definite advantage with respect to core operating costs. Employee health costs, for example, are more than 50% lower than the cost in the US. Equally attractive are provincial and federal tax credits that can cut the after-tax cost of a US$100 research and development expenditure to less than US $41. Further, KPMG studies have shown that Canada maintains an advantage over other developed countries with regard to core business costs in the auto, chemical, and advanced manufacturing industry sectors.

As significant, Ontario's government helps build and strengthen leading industries within its borders with investments of its own, through financial incentives to support specific company projects and the funding of world-class research facilities, centers of excellence and industry-academia partnerships.

The automobile industry cluster, for example, continues to benefit from Ontario's Automotive Investment Strategy, a CDN $500 million, five-year program launched in April 2004.

The life sciences industry cluster will benefit from government investments that include the Ontario Research Fund (ORF), which will consolidate several Ontario research programs and provide a total of $634 million U.S. funds for ongoing and new research projects through 2009-2010; the new Cancer Research Program with the existing Ontario Cancer Research Network, which represents a $253 million US investment until 2009-2010; and a new Research Council of Ontario that will help co-ordinate public research and raise Ontario's profile as an international research centre.

In ICT Industry will benefit from ORION (Ontario Research and Innovation Optical Network), which facilitates research among universities, colleges and research centers in Ontario, and through connections to CA*net 4, which enables worldwide collaboration. Also, the Communications and Information Technology Ontario (CITO) and Photonics Research Ontario (PRO), divisions of Ontario Centres of Excellence Inc., work with industry, university and college research centers to move new products and technologies from the lab to the marketplace.

In advanced manufacturing industries, an industry unto itself as well as a supporter of the other industries gains from the assistance of the Ontario government's $500 million Advanced Manufacturing Investment Strategy (AMIS) which was announced in June 2006.

Ultimately, what makes Ontario, Canada, appealing, executives say, is that it balances their often competing needs, by minimizing risk and keeping costs reasonable, but also by working to create an innovative culture that brings science, industry and investors to form the industry clusters where manufacturing thrives.

The Honorable Sandra Pupatello is the Ontario Minister of Economic Development and Trade. The goal of the Ontario Ministry of Economic Development and Trade is to build a strong economy for all Ontario. This is accomplished by helping Ontario businesses innovate and compete; attracting new investment for the province; and supporting Ontario businesses expanding their exports.

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