Smart cities and branding opportunities for location promotion

Clearly the flavour of the season is around the buzz about developing smart cities/intelligent cities. This represents a wonderful branding opportunity for cities to elevate location promotion to another level.  Needless to say, those who grab it quickly would benefit from this opportunity greatly. Since the time the Prime Minister of India announced his plans of developing 100 smart cities and allocating $ 1.2 billion for this programme, there has been a lot of buzz built around this. One can see a good amount of development happening in this direction which is good news.

There are numerous professional and contracting opportunities for those working in the areas of urban planning, IT, software development, sustainability development, green tech, clean tech etc. It’s a long road for India as far as development of a complete smart city is concerned in terms of the benchmarks established by say, European cities.

Smart cities development can be classified into two categories- a. creating an entirely new or a green field city and b. retrofitting an existing city with smart technologies required for the convenience of its citizens. While the former is a big exercise requiring mammoth efforts, the latter is an opportunity that many cities are capable of executing given their resources and constraints, relatively speaking. It also appears to be an organic approach to bring the dream of smart city to fruition. For the sake of this write up and where opportunities for city branding seem to be more wider, I shall focus on the latter.  

A good starting point can be identifying areas where development of the ‘smart city’ should be considered. Clearly, issues where needs  of the city are highest and need to be addressed on priority would be important. For example, monitoring and surveillance technologies to improve security of the city or intelligent traffic systems to regularise traffic flow are the need of the hour in most urban areas in India. All these developments could immediately be leveraged into a branding opportunity as this would catapult the city into a different trajectory altogether.

In terms of what happens to the inherent strengths of a particular city and whether they may fall in the background or stand diluted, a smart city tag, opens up avenues to combine both and in fact, takes the image of the location to another level. For example, when a temple city includes the word ‘smart’ in the branding of the city which could then turn it into a ‘smart temple city’, perception changes and takes the city image to another level.  For example, crowd management technologies or surveillance gadgets would create a sense of better security in the minds of believers. From the point of view of the outside world, a branding exercise like this creates a lot of new interest, curiosity and confidence in the city brand.

Advantages of seizing opportunities such as these impact many city stake holders. Firstly, this creates a completely fresh interest in a particular city which means existing marketing campaigns of city promotion that have reached a point of stagnation could get reinvigorated from the ‘smart/intelligent city’ tag. This has a direct impact for the real estate industry which is generally at the forefront of city promotion campaigns. Certain selling points such as a new industry coming in, road developments, a big retail chain setting foot have become cliché and stale. Many other cities are already talking about the same message maybe in different forms, so target customers have become immune to such messages.

City advocates have a good opportunity to speak about the city and the development around ‘smart city’ which people are also curious to know.  Almost all key drivers from a city point of view, depending on the developments being carried out stand to benefit. There could be ‘smart city’ developments around agriculture, manufacturing, tourism, religious and cultural places, weather and climate etc. which means that opportunities are aplenty. Also, most of these are ongoing which means a lot to talk about on an ongoing basis for location promotion. New technologies create interest and talking points. It would be a great idea to develop a common platform such as a website or a fan page that tracks, monitors and updates people about progress on these developments.

In terms of leveraging this opportunity, the key is to start taking steps in the direction of planning the development of a smart city on small projects. It could even begin with development of a neighbourhood and scaled up at the city level. Baby steps could also throw branding insights and in turn extend this on a larger canvas and take up a strong ‘position’. It is important for cities to get started quickly if one has to take advantage of the ‘smart city’ branding opportunity.

Determinants for deciding FDI location

It is important to understand which factors are key for  investors when it comes to making decisions on FDI location. There could be numerous factors which may be complex at times but based on various literature, research and expert views, certain determinants emerge which are used to evaluate the attractiveness of an FDI location.

These determinants are as follows:

• Country’s political and economic stability
• Geographic location
• Market size
• Cost of operations
• Infrastructure
• Availability of skilled labour
• Incentives and Taxation

Country’s political and economic stability:

Investors are keen to understand what sort of a political system prevails in a particular country and what has been its recent record in terms of its approach towards foreign investors. Every foreign investor is interested in knowing if the country has a ‘FDI friendly’ approach. Investors are put off by any indications of inconsistencies in terms of political decisions or ambiguous policies.

Investors are very interested to know how is the ‘financial health’ of the country. Simple indicators like GDP, GDP to Debt ratio, per capital income, rate of inflation, rate of unemployment, foreign exchange reserves gives one an idea to assess the financial health of the country.

Geographic location:

The location of the country is an important factor for reasons such as access to other neighboring markets, climatic conditions, accessibility and travel time from home country. If the country’s market size is in itself huge, there is not too much of a concern regarding access to neighboring markets since that would be secondary. An excellent case in point here is India and China. Climatic conditions are important to understand what sort of weather conditions one can expect during the year if one has to be based there. For physical products, this is an important factor in terms of the conditions required for storage and its shelf life especially if they need to be imported. Connections from the home country to the FDI location in consideration gives one an idea of the accessibility and time taken to travel.

Market size:

The size of the market is, if not the most attractive but is definitely a very important factor for investors. It makes perfect business sense to be based close to your customers and this requires quick delivery and processing time. All this makes it imperative when one talks of physical goods that the market size is a very important determinant for FDI decisions. The top FDI locations in the world today are the ones that have an attractive market size.

The size of the market is also tied up to the demographics of the location and within that, the age of the target market and its levels of consumption are key indicators.

Cost of operations:

The off shoring business model is based on the fact which location offer the best cost arbitrage and this has fueled FDI in many countries. China, India, Mexico are excellent examples that demonstrate this ability. A simple calculation indicates whether the cost of operations in the home country would be cheaper than some other location plus the cost of logistics for the same and this goes beyond the off shoring model.

Infrastructure:

How good is physical and organisation structure, facilities etc. in a particular country is important since one has to estimate the cost and time taken to move goods from one place to another and also arrive at an estimate of the shelf life condition during this process. Also, electricity, telecommunications, internet connectivity are important factors in understanding how much is the country geared up on the infrastructure front.  Infrastructure, therefore, is an important factor for any FDI or investment location decision.

Availability of skilled labour:

Labour forms an important determinant for an FDI decision and it is also sector specific. For example, the biotech industry may require skills for Research and Development while the Auto industry may require engineers for its project. Certain industry may require manual labour more for its operations, for example, industries that are based on natural resources. Therefore, whether the particular location has skills that the company requires for its operations is an important question for its investment decision. Quite obviously, the labour pool is inter-related to levels of education the requirements of which are sector specific.

Incentives and Taxation:

The FDI industry is as competitive as any other industry and therefore, countries/regions need to supplement their efforts with an incentive system to attract investors. Common forms of incentives and taxation factors are subsidies, tax credits, cash rebates, tax holidays, subsidized land/ lease rents etc. Although investment or FDI decisions are not entirely based on incentives, they form an important constituent especially in determining how soon would the company start making profits on the investment it makes.

Various other factors are important for investors include levels of bureaucracy, corruption, crime rate and effectiveness of the regulatory regime which are equally significant determinants of the

locations of foreign investment. Having said that, factors also depend on the particular country or countries that are being assessed and the particular sector in consideration. For example, in certain countries where bureaucracy levels are high, investors could place more emphasis on this factor vis-a-vis some other key factor since that could be a big impediment in investing in that particular country compared to lets say, its market size.

For certain sectors such as pharmaceuticals, investors may look at the regulatory regime even though the

value of market is high. For example, for Asian companies, they need to be EU GMP compliant which

is a stringent process to enter the EU market and as a result may be a hurdle to entering that region and having a base there. Compared to the EU, the African or the Latin American market would be easier due to semi-regulatory norms for the pharmaceutical industry.

Leveraging the power of diaspora for investment promotion

If there is one thing that anyone can speak with excitement and passion when one is in a foreign country, it is about one’s own homeland. Every nation has thousands and sometimes millions of their countrymen staying in some foreign country on a temporary or permanent basis. From the point of view of promoting attractiveness of a location, it is this people power that could be leveraged for luring investors.

Diaspora or expatriates can be classified into various ways but the important categories could be businessmen, working executives and students. All these are important from the point of view of location promotion. These are like your website-active and alive 24x7 in some part of the world tuned in to what’s happening and experiencing, in the part of the world they are staying.

Quite obviously, one is more glued in to local information. He would know about the weather, the stores, pubs, restaurants, parks etc. in his part of the world. He would most certainly be also aware about the business and the economy and about local companies making news. He may also have access to information about which companies are growing, expanding or possibly, looking for overseas investment opportunity. It is this information that is crucial for the home country in terms of promoting a location as an investment destination. These are useful leads.  So how does one channelize and leverage this information and leads?

A notable example is that of the investment agency of Ireland which introduced a reward program which pays one for any qualified lead of an investor. Of course, this wasn't only meant for only the Irish diaspora but for anyone who could pass on an investment lead. Quite innovative and may have been a success benefiting both the agency and those who passed information on leads. I think this may have resonated quite well with Irish diaspora staying in other countries since there is a monetary benefit also involved.

Having a systematic approach for location promotion by leveraging the power of the diaspora could prove quite useful.  A good starting point would be to generate a database of diaspora.  Ideally, from those locations which are target countries for attracting investment. Generating this data could be quite simple since those staying abroad tend to organise themselves in some sort of a community group. It could be a business association, a student’s group or a social/cultural group.  The High Commission may also have access to such groups and possibly all individuals. The second step is to communicate to them about the importance of this initiative and how this could result in the community getting benefited. For example, a new company setting up operations would result in creating employment which would ultimately benefit people back home. While monitoring information and passing on this data is good, this could be a passive effort and certain information may be repetitive. Like for example, news about a potential company expanding, published in a newspaper may be known by many and therefore, the same information could be passed by different individuals. 

So how does one follow a more proactive approach? What could be useful is the diaspora having conversations with their colleagues, acquaintances and speak about their city, country, region whenever there is any such opportunity. For such conversations to be effective, the message should be uniform and convey important highlights about the region so that it generates interest. It should be kept brief and well articulated. Information about places, its peculiarities, specialties, cuisine etc. are generally interesting and people like to listen about it, especially in a foreign land so these conversations could centre around this. As much as possible, one must avoid airing views on politics, religion, disputes or any topic which may seem controversial and may just run into an argument or debate. It’s possible that conversations like these could throw up some useful information about potential leads, if smartly done. In any case, this would definitely help in raising the profile of the place which would benefit the country’s image in the long run. If the message is uniform, a clear identity of the place would be communicated which is a good news from a marketing/branding perspective.

I think by following the above steps, one could leverage the presence of diaspora and make meaningful gains in promoting a location. Like any other initiative, this effort has to be consistent and also ensure that the investment agency is equally responsive in handling any such information/ investor leads that are passed on otherwise this whole exercise may be a futile effort.