Choosing a Location for a Regional Headquarters
There are many challenges that await any organization that chooses to expand outside of their home market and to venture into foreign countries in search of new growth opportunities. One of the key challenges that these organizations face is the selection of a location for their regional headquarters. For many, site selection in foreign markets is often focused on finding sites for production facilities or back offices. However, choosing a suitable location for a regional headquarters can often be just as important. Make the right decision, and the organization in question could propel its growth in the region in which it intends to expand. Make the wrong decision, and the organization in question could find its growth being severely hampered in the region in which it is operating. As such, choosing a location for a regional headquarters is very important and much consideration must go into this choice.
When it comes to choosing a location for a regional headquarters, there are a number of factors to consider. For our purposes, we will look at five of these factors:
- Access to labor: For many organizations, no factor is more important than the ability to attract labor. For some, this means the ability to attract highly-skilled people. For others, this means the ability to attract lower-cost (but still highly-productive) workers.
- Access to clients: Obviously, being close to its clients in a particular region is also an important consideration for any organization that is seeking a location for a regional headquarters. This typically means being located in a large market where purchasing power levels are relatively high.
- Access to suppliers: For some organizations, having easy access to its regional suppliers is a crucial consideration, particularly in many manufacturing and industrial sectors. Some organizations have based their entire regional location strategy on this factor alone.
- Infrastructure: As many recent site selection projects have shown us, the quality of a potential location’s infrastructure plays a major role in the decision-making process of many organizations. From the offering of direct flights to major markets to the quality of a location’s road network, infrastructure often plays a decisive role.
- Attractiveness: It is easy to overlook the influence that the attractiveness of a potential location plays in site selection decision-making. This has enabled many locations around the world to continue to attract organizations, even if they trail behind their competitors in terms of the other factors listed above.
Now, let’s take a region-by-region look at the battle to attract regional headquarters and see which locations are attracting the most investment in terms of regional offices.
- North America: The vast scale of the United States (and by extension the North American) market has allowed the region to attract huge amounts of investment from outside of the region. This has led to a proliferation of regional headquarters, mostly across the US. The East Coast between Boston and Washington (including New York City) remains the leading sub-region for regional head offices thanks to its location and abundance of skilled labor. The West Coast from Seattle to San Diego also is a major location for regional head offices, especially in tech sectors thanks to the fact that the region is the center of many of the world’s leading tech industries. Lower costs and good infrastructure has also allowed many Midwestern and Southern cities in the US to also attract organizations to set up regional head offices in recent decades.
- Europe: The European Union has created a unified market nearly on the scale of that of North America, but the differences between individual countries in the EU remains much greater. London and the UK were the unquestioned leaders in terms of attracting regional head offices in Europe, but Brexit has forced many reorganizations to reconsider their plans. Other regional centers such as Brussels, Frankfurt, Paris and Amsterdam have moved to attract more regional headquarters in the wake of Brexit, but there is unlikely to be any single location that dominates the race to attract such investment in the coming years.
- Asia-Pacific: Unlike North America and Europe, the Asia-Pacific region is not a single unified market and this creates difficulties for organizations that wish to establish a single regional head office in that region. China, India, Japan and other large Asian countries are all essentially stand-alone markets that cannot be properly provided for by a distant regional office. Looking ahead, the vast size of markets such as China and India mean that most organizations will seek to establish sizeable country offices in those locations. For those that choose to continue with a single regional office, centralized business hubs such as Singapore and Hong Kong are likely to remain very popular given their business-friendly regulations and access to key markets.
- Middle East and North Africa: Despite a large population, the Middle East and North Africa remains a relatively small market for many organizations. Furthermore, the region has deep political and economic divisions that have widened in recent years, making it hard for many locations to attract investment. This has resulted in only a handful of cities in the region being able to become major centers for regional head offices, with none more successful than Dubai, a city that now serves as the dominant location for regional head offices in the Middle East. Barring a major change in the political climate in this region, Dubai is unlikely to face many challengers to its dominant position in the coming years.
- Sub-Saharan Africa: Sub-Saharan Africa is a region with a vast and fast-growing population, but also one that is deeply divided and generally quite poor. As such, this has limited the options for organizations seeking to establish regional head offices. In fact, many organizations opt to manage their Sub-Saharan African operations out of offices in the Middle East or Europe, rather than within the region itself. As no single country or sub-region dominates the Sub-Saharan African economy, and great distances separate the region’s leading economic centers, choosing a suitable location for a regional head office in this region is difficult, particularly given the region’s infrastructure constraints.
- Latin America: While Latin America has struggled in recent years amid a series of economic crises in many of the region’s largest economies, the region does have the advantage of being relatively unified, with two primary languages and relatively similar markets. Nevertheless, the division between Portuguese-speaking Brazil and the largely-Spanish-speaking rest of Latin America can pose a problem for organizations seeking to set up regional head offices for this region. Likewise, the great distances between the region’s leading economic centers such as Mexico City, Sao Paulo and Buenos Aires are also a challenge. For this reason, a number of major organizations do not have a Latin American head office, while some choose to locate this office in Miami rather than in Latin America itself.
For an organization to succeed in a particular region, the selection of an appropriate location for a regional headquarters is a crucial step. By choosing a location that gives the organization access to labor, clients, suppliers, a solid infrastructure and an attractive office location, the organization will be well-placed to thrive and expand in that region. Many believed that, as the world shrank and became more inter-connected, the need for regional headquarters would become less important. However, as we have seen a proliferation of clusters of growth such as Silicon Valley and the Pearl River Delta in recent decades, there is ample evidence that being in the right spot in a particular region can provide immense benefits for an organization seeking to expand their presence there. As a result, it is clear that, when choosing a spot for an organization’s regional headquarters, the old real estate saying “location, location, location” appears to still be valid in today’s economy.