What drives a U.S. company to set up a European headquarters operation in Brussels, rather than in Amsterdam? Or to choose Vienna over Geneva? Or to pick London instead of Frankfurt? Or even to go for a much lesser-known location like Cortaillod, Switzerland?
The answer depends much more on a company's individual needs and the type of facility desired, rather than because some European cities are inherently "better" than others for establishing a headquarters.
Some cities may have more English-speakers,
while some may have lower costs for office space. Others may have more international airports in the vicinity, and
still others may have cheaper labor or have existing clusters in tune with that company's particular industry.
All of these factors play some part in a company's decision, but some may be weighted much more heavily than others, depending on how the company wants to define the type of headquarters or coordination center. Will it be just a small office with a few executives and a sales department? Or a much larger, high-profile office building, staffing perhaps hundreds of employees? Or even be a site composed primarily of manufacturing and research functions.
Colgate-Palmolive
When Colgate-Palmolive went searching for a European headquarters site, the company used the help of JCG International, Inc., a New Rochelle, N.Y., firm specializing in European-American investments, to lead the six-month study of 10 European cities.
The first phase of the study examined important attributes for locating a headquarters, such as operating costs, transportation, quality of life and taxes. Thirty factors were evaluated using a sophisticated computer model.
| "Every region now offers their own advantages, and it is our function to match those best with the long-term needs of each client."
--Jean-Claude Goldenstein, managing director, JCG International |
The second phase involved gathering data from economic development agencies, real estate, tax and human resource professionals, employment agencies, utilities and airport authorities. JCG International never disclosed the identity of Colgate, a Fortune 200 company, to the prospect cities.
In the third phase, each city was evaluated and ranked against the criteria selected. Once the data was gathered and checked, it was scored within the model framework and weights were applied. Results were then ranked and key factors such as costs and quality of life were reviewed against model findings.
The result was the clear identifi-cation of a few locations that best
met Colgate's needs and were worthy of visits.
"We provided a solid and unbiased information base, as well as modeling technology to help our client find the best option," said Karin Hoerhold, a senior project manager with JCG International. "Serious consideration was given to all 10 cities. It was decided that Brussels, Belgium would operate Colgate's European back office."
| Mountain View, Calif.,-based Silicon Graphics chose Cortaillod, Switzerland, as the site of its European manufacturing headquarters. |
In addition, Colgate's top management chose the Paris/Ile-de-France region for its headquarters because of the primary importance of the French market. The quality of life and transportation infrastructure in Paris were also major considerations.
"Our U.S. clients often have France either at the top or at the bottom of their list when they first contact us," said Jean-Claude Goldenstein, managing director of JCG International. "Many managers like France for its market size, quality of life or technology but hesitate because of their perceptions of social costs, worker strikes or red tape. In this case, Paris offered the best overall fit with Colgate's global strategy."
Eli Lilly
While Colgate-Palmolive's decision was very methodical and based on a number of criteria, pharmaceutical giant Eli Lilly's East European headquarters sits in Vienna for more subjective reasons.
Quality of life issues play a big role in overseas corporate headquarters location decisions, even more so than for domestic decisions. Companies must take into consideration all the cultural differences that relocating executives must adjust to, and the chosen city must be one where they can have a comfortable social life. This may mean a city with a large expatriate community, plenty of English speakers, a reasonable cost of living, opportunities for spouses, and international schools for the kids.
And the same holds true for headquarters staffed primarily by locals, as in Eli Lilly's case.
The decision was a marriage of convenience and accommodation. John North, director of international, public and government relations, tells the story of why Vienna is his company's chosen locale to serve Eastern Europe.
"As the walls started to come down, we started to move into exploration of Eastern Europe," said North. "We did most of that out of our Vienna office, which has been in existence since 1975. At one time, because we were doing the same thing in the Middle East and Africa, we decided to consolidate the two operations, and we put them in Geneva. But now, with some change in management, Eastern European operations is now moving back to Austria."
The new manager is an Austrian national who has supervised Eli Lilly's affiliates in Slovak Republic, Croatia and Bosnia. With children still in school, he preferred not to move elsewhere.
"So I would say the decision really reflects high regard for the situation we have our personnel in, rather than the rivers, the airports or what the tax structure is," said North.
Which is not to say that that the manager's preference of Vienna wasn't extremely fortunate for a company setting up an East European headquarters site.
Several other multinationals, such as Coca Cola, McDonald's and Hewlett-Packard, coordinate their Central and Eastern European activities from Austria because of
the advantages offered there, including geographic proximity, long-standing ties with the East and a superb infrastructure.
"That's important, plus the fact that we've had an office there since 1975," said North. "And frankly, if you look where Austria sits, you can get to the Czech Republic, Hungary and Poland as easily from Austria as from anyplace else. So it is well positioned."
Silicon Graphics
Companies that are planning for other activities -- such as heavy manufacturing, R&D, warehousing and distribution -- to go along with their headquarters office space, may need to look at even more factors.
Last year, Silicon Graphics completed a major addition to its European manufacturing headquarters in Cortaillod, Switzerland.
| "Frankly, if you look where Austria sits, you can get to the Czech Republic, Hungary and Poland as easily from Austria as from anyplace else. So it is well-positioned."
--John North, director of international, public and government relations, Eli Lilly |
The Mountain View, Calif.,-based company is a leading supplier of high-performance interactive computing systems. The company offers a broad range of products, from entry-level desktop workstations to servers and high-end supercomputers, and markets microprocessor designs, entertainment and design software, and other software products. The company's key markets include manufacturing, government, science, telecommunications and entertainment.
Last April, the company opened its $20 million European Advanced Manufacturing and Technology Center.
The new manufacturing portion will produce a wide range of high performance products, from OCTANETM multiprocessor workstations
to Onyx2TM advanced vis-
ual computing systems to the entire Origin 2000TM server and supercomputer line.
The Technology Center is comprised of three labs -- the Supercomputing Lab, the Video Server Lab and the Reality Lab. The facility is intended as a European-wide resource to help the Silicon Graphics' subsidiaries drive business and work with academic, industrial and commercial organizations to develop high-technology solutions.
Such an ambitious, high-tech operation demands a location with highly educated workers -- in good numbers. The center employs about 200, and over 300 new jobs will be created over the next five years of operation.
Silicon Graphics has been doing business in Cortaillod for nearly a decade now, and much of what has driven the company's success is the region's excellent labor force and quality of life that helps attract top-level employees from other countries.
Cortaillod, near Neuchatel, is in one of the main areas for Swiss watchmaking, so there is a long tradition of quality manufacturing. Silicon Graphics does hire a small number of foreign specialists, typically in technical areas such as advanced graphics, and it is able to do so easily because Cortaillod is an attractive place to work and live. Switzerland is also home to two of Europe's best technical universities, which offer a good pool of young engineers.
Operating costs. Market proximity. Quality of life. Infrastructure. Labor force.
| Silicon Graphics, which has its European manufacturing headquarters in Cortaillod, Switzerland, is a leading supplier of high performance interactive computing systems. |
These are just some of the issues that help explain why these three companies chose Paris, Vienna and Cortaillod for their respective operating centers. By looking at a chart of European cities and the number of headquarters operations located within each city, certain names will be at the top of the list. These include London, Paris, Brussels and Amsterdam. But they may not necessarily be the best for every company.
"There is no single or simple answer in European site selection," said Goldenstein. "Since unemployment is currently the No. 1 problem in Europe, the competition among countries, regions and cities is heating up. Every region now offers their own advantages, and it is our function to match those best with the long term needs of each client."
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