Regional Marketing and the Strategic Market Planning Approach to Attract Business and Industry Case Study

Table of contents

1. Introduction

2. Definition of Regional Marketing

3. Critical discussion of Kotler’s theory

4. Case study: Regional Marketing in Orange County, California

5. Conclusion

6. Sources

Appendix

1 Introduction

Over the past three decades economic development has become entrenched as an important function for local governments in the US and Europe. Since localities receive more powers and responsibility from the State, localities try to find new ways to support growth in order to prevent fiscal trouble. In particular, the advent of highly internationalized capital and commodity markets, electronic information networks, mobile managements and production resources has decentralized labor processes and markets and created what economists call the new regional economies. Despite these rapid and consequential changes at the global level, most economic development policy is conducted at the local level. Especially in the US, pushed by historical and cultural forces, city governments succeeded to overcome bureaucratic, hierarchical and smokestack-thinking behavior. A dramatic example of shifting responsibility to city level is California’s Proposition 13 of 1978. The administrations of Ronald Reagan in the 1980ies escalated those demands for leaner and cheaper government, forcing public officials to search for a new way of administration. As federal aid evaporated and the States emphasized competition, California’s local governments were pushed towards corporate-centered economic development. Nowadays, places increasingly compete with other places to attract their share of business investment. The recession of the early 1990ies did nothing to weaken the sense of rivalry among Californian cities for economic development. Until now, this corporate-centered approach to economic development rather focuses on local “growth machines” and the business elite than on democratic participation, local control and social justice. The notion of public entrepreneurship, a management approach of the reinventing government movement, appeared (Cohen, Eimicke 1998; Osborne and Gaebler 1992). Here, governments act as managers, using similar techniques as private businesses are using. Management concepts, such as customer-oriented strategic planning or marketing have been applied to regional planning in many cases.

The central tenet of the regional marketing concept isisis that in spite of these powerful external forces regions have within their collective resources and people the capacity to navigate successfully through the cyclical fluctuations of our globalized economy. In a world of competition, cities or whole regions can be seen as complex products consisting of competitive advantages bundled together. Some competitive advantages can be altered and adapted to market situations by local governments, e.g. industrial incentives. Those incentives are designed according to the objectives pursued and to the needs of relocating companies and to the needs of the community.

Many new and innovative techniques are emerging to stimulate local economic development in the US. All require some form of partnership with private sector, especially business attraction as a form of regional development. The number and types of incentives are still evolving and are limited only by the imagination and creativity of public officials. The only limitations that exist are the parameters established by State and federal framework. Since local governments have their own unique political environment and their decisions are subject to scrutiny by the electorate, the economic development strategy selected must be tailored to fit the needs of the community. Hence, local governments need to find strategic development approaches that stimulate the business community on one hand and serve the needs of the residents.

Regarding economic development techniques, all tasks local governments fulfill are possibly having an effect on corporate direct investment. Also, there might be too many factors that are considered in business location decisions, which are beyond the influence of local governments. There has been much contradictory literature about the impact of incentives on economic growth (Netzer 1991, Fisher and Peters 1998, Oates and Schwab 1991, Bartik 1991). Most of the literature have in common that incentive programs, if developed and executed in a strategic and well-coordinated environment, have a positive impact on local growth. This is where Kotler’s idea of strategic market planning as an integrative approach of planning economic growth begins.

1.1 Delineation of the problem

Despite globalization, location still matters for corporations. Nowadays, corporations are changing the way they decide where to locate and where to relocate. These decisions have serious implications for cities and regions as they try to position themselves in a changing competitive environment. Aided by advances in telecommunication and transportation infrastructure, business executives can successfully coordinate many corporate functions in a multitude of locations. Manufacturing may take place in a developing country, where labor is cheap and electric utilities and water resources have become reliable. Back office operations may be located in a small U.S. city where real estate and labor costs are low and the labor force is well-educated and articulate. Executive management may be located in pared-down headquarters in a high-rent large city with an international airport and attractive lifestyle amenities. Generally speaking, companies make use of particular locational advantages by splitting up their business operations. Sophisticated software enables today’s location decision-maker to sort through a vast array of information about global labor markets, housing costs, transportation, specialized services, tax structures and tax subsidies when choosing a location (Cohen 2000). Over the last fifteen years, improved information and technological advances have moved the location decision-making process to the center of corporate strategic planning.

According to the National League of Cities’ annual financial survey of US cities 2001, more than half of its surveyed municipalities suffer from an imbalance between expenditures and revenues, which has resulted in increased unemployment and service reductions. The reasons for their trouble are manifold. Due to internal and external circumstances some are chronically depressed, struggling with out-migration, unemployment and abandoned property. A continuous decrease of the city’s tax base leads to fiscal shortages for funding schools, hospitals and other public services.

As a consequence, local governments must apply a new approach to plan economic development. As business behavior towards public services changes, local governments need to adapt and reassess themselves. The reinventing government movement sees an answer to these changes by having governments act like business. Accordingly, local governments should make use of specific business management instruments. Considering the fundamental differences, they demand to shift governments from bureaucratic behavior to more entrepreneurial behavior. Regional marketing and the strategic market planning approach provide theories and instruments to enhance the shift on this behavior continuum.

1.2 Marketing as a regional development approach

Competition for residents, inward investment and tourism revenues at various spatial scales has intensified (e.g. Kotler et al. 1993, 1999; Ward 1998; van den Berg and Braun 1999). This has led to a number of significant implications for the organization and management of urban places. Public sector administrations have had to modify their traditional modus operandi and to share responsibility for the management of the urban place with a wider range of (especially private sector) stakeholders. Another significant implication is the application of marketing principles to regions as they seek to develop some form of competitive advantage that is as sustainable as possible in order to compete more effectively in these new conditions (Warnaby et al. 2001).

This expansion of practitioner activity has been mirrored by academic interest in the marketing of places, particularly in the disciplines of geography, political theory and sociology, where there is a consensus that marketing principles are applicable (with modification) to cities and regions (e.g. Ashworth 1993, Ashworth and Voogd 1990, Kotler et al. 1999). Van den Berg and Braun state that, “regions can learn from the marketing experiences of the business community, but at the same time need to find their own strategies and develop a tailor-made approach that suits their purposes” (1999, p. 998). Ashworth argues that, ‘if [place marketing] is to be attempted successfully, then a special type of marketing has to be devised’ (1993, p. 648).

The regional marketing approach is useful for places that are in crisis or want to prevent an outbreak of crisis. In general, places in trouble are subject to internal and external forces. Internal forces stem from the natural business cycle process, where a period of growth is always followed by a period of decline. Kotler calls them the decay and growth dynamics of a place (1993, p. 7ff). If a place is originally attractive (strong opportunities for industry and residents), growth dynamics produce inward migration of business and labor force, which lead to a higher tax base but also to higher real estate costs and more infrastructure expenditures due to rising social needs. The system would collapse if the local government would not increase its taxes. Then, raising taxes leads to outward migration of business.

At this point decay dynamics take over. If major companies leave the region, unemployment rises, tax base is reduced and infrastructure is not affordable. This induces outward migration of residents and other business followed by declining tourism. As a consequence, banks tighten credits, bankruptcies increase, crime rates rise and the place image deteriorates. As a result, the location finds itself in a crisis.

External forces of the economic environment are beyond control and cause imbalances in the space of localities. Major external forces according to Kotler (1993, p. 8) are rapid technological change, global competition and political power shifts. Communities need to respond effectively to these threats and they must anticipate their occurrence.

A central proposition of Kotler’s idea is that market changes occur much faster than a locality can respond and adapt to (Kotler 1993, p. 18ff). Thus, investors have a crucial advantage over local communities that seek economic growth. The challenge of place marketing is to strengthen the capacity of communities to react to the changing global economy by using strategic planning. It is based on the assumption that the future is largely uncertain and local entities need to respond in a flexible way. Strategic planning calls for designing a community with a view to potentials investors’ needs of the present and the future. Strategic planning can be used to make a region fit for opportunities and threats. Place marketing succeeds when stakeholders derive satisfaction from their locality and find their expectations met. To function properly, place marketing demands a market-oriented view of leadership. Local administrations need to act more like entrepreneurs, accumulate expertise in developing their “products”, markets and customers and face place competition. Kotler tries to offer a modern bottom-up planning tool - the strategic market planning approach - that places can use to improve their competitive positions.

1.3 Methodology

In the first part, the notion of regional marketing and its implications will be presented according to Philip Kotler’s literature. Then, this research paper will use the case study technique to test effectiveness of the regional marketing approach in a local environment. It will be sought to find a relationship between business attraction efforts and increasing quantity of business locations. Measuring effectiveness of an abstract construct will be based on qualitative analysis of the situation before and after. With a view to the findings of this case study it will be tried to induct general usefulness and effectiveness of the regional marketing approach to induce relocating activity into a region.

As a case study Orange County, State of California, USA is chosen. In accordance with the case study technique (see chapter 2.7.2) it will be tested if the regional marketing concept can produce a positive impact on inducing relocating businesses. To this effect, Orange County’s marketing efforts to attract direct corporate investment will be presented in detail. Eight personal one-hour-interviews have been conducted with economic development decision-makers, regional planners and local politicians. The questionnaire consists of seven open-ended questions. A sample questionnaire is included in the Appendix. One additional interview is made with Lincoln/Mercury, Ford’s luxury automobile division headquarters, in order to include a relocating firm’s point of view on Orange County’s business incentives.

Based on the answers of these interviews and US, especially California State, literature research on local economic development, conclusions about the usefulness and effectiveness of Orange County’s regional marketing program to attract relocating firms will be drawn.

1.4 Objectives and structure of the master’s thesis

This paper describes and evaluates how regional marketing, based on the ideas of Philip Kotler’s Marketing Places (1993), might be a reasonable tool to attract direct corporate investments. This research paper concentrates on strategic market planning of local economic development programs. It is presented how to make use of local competitive advantages by useful bundling of incentives. The notion of marketing and governing places is combined and shall offer the reader a new perspective of meeting regional economic objectives for places.

This thesis is divided into two parts: a theoretical part (where industrial incentives are presented and Kotler’s concept is explained and criticized) and an empirical part (where regional marketing is applied and tested for effectiveness). First, it will be defined what regional marketing is and what forms of incentives are considered. Then it will be presented how marketing strategies can be organized in a local environment, followed by a discussion how companies make location decisions. In the last chapter of the first part, a critical discussion of marketing strategy is presented. In the second part, an emphasis will be put on the case study; a location (Orange County, California, USA) where economic development based on marketing planning came to work. The place’s business attraction program will be presented and explained in detail. With a view to the situation and implications analyzed in the case study, it will be tried to scrutinize effectiveness and usefulness of economic development programs based on regional marketing principles for this place in question and in general.

1.5 Region

The term region, as used in this paper, refers to the geographical space where regional marketing projects are applied. It does not need to be a geographical entity or a political jurisdiction: Regions can be sub-national, supra-national or trans-national (Maier/Tödtling 1996). Usually, administrative borders give an orientation, but cross-border marketing projects can be useful too. The US twin cities St. Paul and Minneapolis have succeeded in establishing an economic development program based on marketing principles together (Kotler 1993, p. 97).

The marketing region is the bundled spatial structure that presents itself to the audience. A region is subject to the objectives of the marketing program set up by its regional actors. Whatever to be planned and communicated is, in the eyes of the perceiver, a region. Thus, the viewer or the target market ultimately decides what a region is.

By looking at the region from a socio-economic point of view, it is necessary to define the region by social interaction, small-scale socio-economic networks and a specific regional identity (Jekel 1997). The term “regional identity” is to be defined as identification of regional actors with a project (the project of collective regional development), as opposed to identification with just a physical part of the landscape. In doing so, the region can easily be viewed as a larger corporation with several interacting departments that develops its own corporate culture. Inhabitants of the region and regional institutions could be seen as shareholders. They can invest in the region by taking part in decision-making and through citizen initiatives. Results of these initiatives should bring “regional share-holders” in the position of better chances of employment and income. Thus, this thesis does not take the region as given: it has to be produced if we want to be successful in regional economic development. Kotler (1993) suggests that regional marketing with an integrated planning perspective will help to reach this goal.

2 Definition of Regional Marketing

There have been numerous controversial definitions of regional marketing (or place marketing, city marketing) in recent literature (Simon 2001). Most literature tries to define regional marketing as a strategy. In this paper, another understanding of regional marketing is applied, which involves strategic market planning. Here, regional marketing is viewed as an approach for local economic development planning and not as a strategy itself. The core of marketing is originally embedded in the science of business management and applied to regional planning, so marketing must be defined in the first place.

In general, marketing is a strategic instrument to create and stimulate market exchange processes between suppliers and consumers (Kotler 2001, p. 9ff). Also, the American-Marketing-Association defines “Marketing is the performance of business activities that direct the flow of goods or services from producer to consumer”; but this is based on certain principles and viewpoints of the environment. Marketing tries to establish relationships where both, the (profit-oriented) objectives of suppliers and needs and wants of consumers are considered. Marketing focuses on satisfying needs and wants by creating value to consumers. Accordingly, marketing is not a means to sell goods or services, but to create and foster long-term relationships in an efficient manner. The directive of marketing is free exchange under fair conditions between business partners to gain value for both sides (Kotler 2001, p. 5). In such a market environment, marketing seeks to create value by considering needs and wants of consumers. Thus, products or services are developed, shaped and communicated with regard to market needs. This shall be done more efficiently and more effectively than the competition. Profits are the result of satisfied consumers that purchase the best-fit product. Regarding the role of marketing in business units, it is a management and organization perspective. In market-oriented strategic planning, objectives and resource allocations are adjusted to market opportunities. It is a concept for businesses that guides production and organization, processes and behavior in a market environment.

To sum up, marketing seeks to create and design long-term relations with the market by creating value to consumers. Most of these relations are based on trade or barter, i.e. exchange of goods and services. But marketing can be applied to various relations and thus, be differentiated between non-profit marketing and commercial marketing. In commercial marketing, the main objective is maximizing profits in contrast to non-profit-marketing, where maximizing efficiency is targeted. Since local governments seek to satisfy certain interests and do not seek to maximize profits, regional marketing is derived from non-profit marketing. But regions are different to business units, since spatial structure is not subject to change. Simon (2001, p. 5) finds three features peculiar to regions:

- Regions are highly diverse, complex, socio-economic systems
- Regions are strongly influenced by given environment, such as landscape and climate
- Regions are strongly influenced by its residents and workforce

Thus, regions are predetermined complex systems, where regional marketing efforts can be based on and not vice versa. Regional marketing is a means to locate, bundle and present variable and non-variable features of a region that are relevant to supporting market processes.

The majority of North American literature (Lovering 1995) suggests a different approach of what marketing places imply: The North American approach articulates the overwhelming primacy of economic development as the rationale for place marketing, with localities regarded almost as businesses (while factors such as community issues are mentioned, consideration of them is often implicit rather than explicit). Above this, in the US, regional marketing refers dominantly to the recruitment of relocating companies. This refers to promoting, acquiring and mediating between place seekers and place developers. In some literature, it includes the correction of misperceptions about the place (Fisher 1998). Correction of information is dominantly done by promotion, which includes using tools such as public relations, advertising, direct mailings and conferences. From Kotler’s point of view, promotion is only one part of marketing. Philip Kotler’s (Marketing Places, 1993) summarizing definition of regional marketing embraces the wider notion of regional marketing:

“The strategic market-oriented planning of a region with a view to matching stakeholders’ needs and local economic objectives.”

According to this definition, regional marketing not only implies ways of selling of places. The selling of places is the last agenda on a long list of tasks. Here, regional marketing includes strategic planning based on market studies and research. Regional marketing implies a management-oriented entrepreneurial view of planning, that uses an outside-inside approach to set objectives. The outside-inside approach is based on the view that regions are placed in a competitive market environment, where conditions change constantly. Through market research on a national and global level the outside environment, future opportunities and threats of a particular region are deduced. Here, planning is based on a clear vision of what markets demand and how they behave. Then, these forces of the outside environment are brought together with the needs and wants of the community, in order to set economic objectives.

European regional planners have absorbed this wider notion of regional marketing suggested by Kotler. A European approach argues for a more holistic interpretation of place marketing, incorporating social as well as economic imperatives. As Paddison states, “This more catholic interpretation allies the economic promotion and development of the city with its physical and social planning so as to produce the ‘harmonious city’ able to satisfy the requirements of different users, its citizens, investors and visitors” (1993, p. 340). But despite this emphasis on social issues, economic imperatives remain paramount and a business orientation is becoming more overt. Also, European literature (Ashworth and Voogd 1990) emphasizes on the integrative and coordinative aspect of regional marketing. Besides, the entrepreneurial approach was new to European regional planning. Simon (2001) defines regional marketing as an instrument to control and implement development processes of a region under involvement of private and public stakeholders. According to Simon, its main objective is to strengthen economy, image and identity of a defined region in order to create sustainable competitive advantages by using marketing instruments. Thus, regional marketing is a cooperation- and integration-based regional development instrument.

Regional marketing can be instrumental to various regional government agendas and is useful for numerous strategies. It must be noted here that this paper concentrates on attracting relocating businesses to encourage economic development. If the main objective is to increase attractiveness for business, it is usually referred to place or location marketing. Place marketing, at its core, embraces four activities (Kotler 1993, p. 18ff):

- Designing the right mix of community features and services
- Setting attractive incentives for the current and potential investors
- Delivering a place’s “products” and services in an efficient and accessible way
- Promoting a place’s values and images so that potential users are fully aware of the place’s distinctive advantages

Place marketing uses the strategic market planning approach to plan development (see chapter 2.1). It calls for designing a community to satisfy the needs of its key constituents. Place marketing succeeds when stakeholders, such as citizens, new businesses and investors find their expectations met (Kotler 1993).

2.1 Regional marketing and regional economic development

First, one must understand that what is referred to ”economic development policy” in the US literature can be seen as ”regional policy” in Europe. Regional policy is government acting to influence economic processes on a local level (Maier and Tödtling 1996, p. 169). Its main objective is to adjust the spatial allocation forces of markets. Since open markets do not always function efficient, the outcome is to be corrected by government action. In Europe, major actors are central governments (chambers and ministries) and provinces (Bundesländer), but also the EU on a supranational level. It should be noted that EU regional policy is generally funded and directed by central government, whereas in the US State and local government usually manages it. As a result, central control of incentives and restriction on that competition, are clear with most regional policy instruments, but less so with US economic development policies.

Regarding regional policy, a general goal of local administration is to spur economic growth by attracting outside business activity. The first question is what strategies local governments can use to influence companies’ location behavior. Strategies are a combination of instruments used to meet local economic objectives that are based on certain theories of economic development. In order to ensure efficient local policy, local governments combine their instruments in a consistent and logical manner (Maier and Tödtling 1996, p. 179). Capellin and Molle (1988) differentiate between two broad strategies: exogenous and endogenous development strategies. Exogenous strategies rely on economic impulses from the outside of the region and put the mobility of capital and labor in the fore. Here, incentives and infrastructure development are viewed as a measure to increase business activity. Endogenous strategies concentrate on the local capacity and competitiveness. These strategies aim at local resources and the efficient allocation of them. Regional marketing is a planning standpoint that can be used for both strategies. It is an approach to integrate instruments in an efficient manner. It is based on an entrepreneurial view of managing localities that emphasizes on inside and outside communication. Thus, it can be applied to develop regional capacities or to enhance the inward flow of capital. Regional marketing programs often combine both strategy elements, but it fits better for designing exogenous strategies. In practice, the marketing planning viewpoint is more frequently used to design tourism or business attraction programs by local governments.

Regional marketing uses strategic market planning to guide the economic development planning. According to Kotler (1993, p. 76ff), strategic market planning is a planning approach that passed through three stages (see table 1).

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Table 1, Stages of strategic market planning. Source: Marketing Places, Kotler et al., 1993, p. 77

In the first stage, strategic market planning was dominantly used for attracting large manufacturing companies in order to generate employment. It had its origins in the 1930, where US Southern provinces tried to lure plants from northern States with aggressive efforts. Places tried to reach buyers by promoting competitive deals. Incentive-bidding wars escalated and came to an end in the 1970ies during the recession years.

In the second stage (1970ies and 80ies), places became more selective. Conventional business recruitment programs built on financial incentives were often publicly criticized, since incentive benefits not always exceeded incentive costs. Consequently, instead of pursuing a single goal, that of business attraction, local governments moved towards numerous goals: business retention, business start-up support, tourism, export, promotion and foreign investment. Strategies, now based on competitive analysis and market segmenting, became more refined. In segmented markets, products and services of a place are tailored to specific customer groups. Besides, places put more emphasis on maintaining and supporting internal markets and resources (Kotler 1993, p.78).

In the third stage that started in the 1990ies, places moved to the stage of competitive niches and product development. Now, places are seeking to perceive themselves as distinctive places with specific competitive advantages for selected industries. Location factors are seen as a bundle of products and services that create value to investors. Places are investing in a diversified portfolio of target industries while pursuing some clusters of related businesses. Places are more and more investing in educating human resources (Kotler 1993, p.78).

These three historical stages give an overview of how regional economic development activities change as a result of external forces and internal pressure. Places become more market-oriented and efficient in economic planning. After the 1970ies, place development was no longer a policy enclave of the national governments and no longer an activity limited to the public sector. As development responsibilities moved downward the government systems, resources and support shifted from public to more private involvement. Endogenous strategies came to the fore and places focused internally on resources and leadership to build competitive capabilities (Kotler 1993, p. 79). Regarding this dynamic change, place marketing emerged as the integrating process that links a place’s potential to overall economic development objectives.

2.2 Major elements of a regional marketing program

To Kotler, a regional marketing program is conducted by using strategic market planning. The major elements in strategic planning are planning groups, marketing factors and target markets (see figure 1).

First, a planning group must be organized, made up of citizens, business people and local government officials. As implied here, collaboration between public and private sector is preconditioned. Kotler mentions that unlike purely commercial product marketing, the active support of public and private agencies, interest groups and citizens are crucial to the fortune of the place development program (Kotler 1993, p.19). In such planning group meetings three tasks must be fulfilled. Task one: A detailed diagnosis of the place’s condition must be set up through market research (i.e. place audit – see chapter 2.3.1). In a place audit, strengths and weaknesses of a region must be worked out and assessed. This implies interpreting forces of the broader environment and understanding the needs and behavior choices of decision-makers. To gather information, surveys and regional studies must be conducted. Task two: Places must develop a long-term vision based on a realistic assessment of the community’s values, resources and opportunities. Objectives of the development plan are clearly stated here. It is framed by the place’s authority to shape and design incentives with a view to their limited legislative powers. Task three: The action plan, including implementation and control mechanisms, that complements the vision must be developed. The action plan embraces several intermediate stages of investment, transformation and building up an effective organization.

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Figure 1, Major elements of a regional marketing program. Source: Kotler 1993, p. 19

Second, four marketing factors that improve the local development must be considered. Factor one: Basic services and infrastructure must be provided and maintained to the satisfaction of its businesses. Factor two: Attractions are needed to differentiate the place from others, in order to sustain current business, enhance migration of high-educated workers and attract new investment. Factor three: The locality needs to communicate its improved quality of life through a vigorous image and communication program. Various promotion techniques can be used to disseminate information about the place to the audience. Factor four: The place must generate support from its citizens, leaders and institutions for creating goodwill and enthusiasm.

Third, based on the previous results, potential target markets must be selected to where the efforts are directed. As Kotler suggests (1993, p. 229), places should not seek growth at any cost. Finally, selecting a target market after the segmentation process also implies a cost-benefit analysis.

2.3 Strategic market planning process

Strategic market planning is a planning approach that starts from the assumption that the future is largely uncertain. The place’s challenge is to design itself as a functioning system that can absorb shocks and adapt quickly and effectively to new developments and opportunities. Thus, regional marketing implies establishing information and control mechanisms to monitor the changing environment and respond constructively to new opportunities and threats. The aim is to prepare plans that integrate the place’s objectives and resources with its changing opportunities. Through the strategic planning process a place decides which industries, markets and services should be encouraged, maintained or deemphasized.

Establishing a marketing plan is a sequential process and moves through five stages: Conducting the place audit, describing the vision, formulating the strategy, setting up the operative plan, implementation and control (Kotler, 1993, p. 81ff).

2.3.1 Conducting the place audit

First task of the planning group is the systematic examination of a place’s demographic and economic characteristics, potential competitors and relevant major trends. This is followed by a SWOT analysis (strengths, weaknesses, opportunities and threats) in order to abstract competitive advantages.

Characteristics should include quantitative and qualitative information about the locality, such as data on population, income, education, housing market, industry structure, labor market, community health system, transportation facilities, public safety, research institutions, cultural, natural and recreational resources. Doing this, information about main competitors and major trends emerging from the greater economy is needed here as well. Conducting research and surveys on a regional and national level can identify main competitors of a specific locality. Also, for the next step - the SWOT analysis - profile information gathered must be carefully preselected. Not all attributes of a region are equally meaningful to target groups that it wants to attract. Thus, for effective profile research, a general idea of what types of companies should be addressed in the future could be helpful.

The SWOT analysis permits strategic planners to carry out issue management. It confronts characteristics of a place (internal condition) with outside trends and developments (external condition). Strengths and weaknesses are identified and assessed with a view to potential investors’ needs and wants. Kotler (1993, p. 86) notes here that strengths are defined by the relative competitive advantage to other places, such as lower manufacturing costs. The concept of strength must be carefully interpreted. Although a place finds a major strength (i.e. a distinctive competence), it does not necessarily constitute a competitive advantage. What becomes important is the relativity of strength compared to peer regions. After strength and weaknesses are identified, opportunities and threats are derived. Kotler defines an opportunity as “…an arena for action in which a place has fairly good chance to achieve a competitive advantage” (1993, p. 86). Thus, opportunities must be assessed according to their attractiveness and success probability. Threats are a challenge posed by a negative trend of the external environment that would lead to the erosion of the place’s condition in the absence of purposeful action (Kotler 1993, p. 87). Threats are classified by seriousness and probability of occurrence. By assembling opportunities and threats facing a place, it is possible to characterize the place’s general attractiveness: An ideal place is high in opportunities and low in threats, a speculative place is high in both, opportunities and threats, a mature place is low in opportunities and threats, a troubled place is low in opportunities and high in threats.

The SWOT analysis permits strategic planners to identify important key issues. Most of these issues involve sizable investment and commitment. Kotler suggests in this phase to appoint committees who research each issue and gather recommendations from outside. These committees should allow for community participation and public hearings. After examining the resulting recommendations, the next step for strategic market planning is to describe visions and objectives for the future.

2.3.2 Describing the vision and objectives

Based on the current place’s situation, numerous projects a place can undertake come to the surface. In order to streamline and coordinate potential projects, a coherent vision must be set up that embraces the whole development plan. The vision lays down a scenario of how the place should look like in the future in the eyes of the residents. It provides clear direction to development officials and becomes the basis for resource allocation. Thus, goals, objectives and a time frame must be included. According to Kotler, round tables or public hearings should be organized where community representatives, interest groups and decision makers explore the possible visions together (1993, p. 91). To find an agreement, a vision can be broadened or more than one complementary visions can be chosen. Alternative visions can be put to a public referendum.

2.3.3 Formulating the strategy

The strategy defines the methods of how the objectives should be achieved. The strategy paper provides a long-term guideline. Various projects are chosen that are eligible and affordable considering a community’s budget constraint. Kotler states that the strategy should answer the questions “…what advantages do we possess that suggest we can succeed with that strategy? Do we have the resources required for the implementation of the strategy?” (1993, p. 95).

2.3.4 Operative plan

The operative or action plan lays down how the strategies are carried out in detail. Here, competencies are established, time schedules are determined and financial resources are distributed. Each action formulated is followed by responsibility, way of implementation, cost and expected completion date. This last planning level of the sequential process must be carried out in a very detailed manner to avoid competence conflicts and to ensure financial control. One of the major planning challenges is to allocate the budget equitably to the areas within the boundaries. Thus, the action plan should set targets for each area rather than deriving broad measures for the entire region. Kotler suggests dividing the locality into inhomogeneous regions to this effect (1993, p. 97).

2.3.5 Implementation and control

The last stage is the implementation and control of the program. The implementation process should be regularly checked for efficiency and success. In case of inadequacy the planners need to take action and adapt the plan. For this purpose, the planning group needs to convene at stipulated intervals to reconsider the objectives and the action plan when needed. Kotler suggests issuing annual reports that highlight achievements and point out failures (1993, p. 98). Several statistical indicators should be selected that are able to reflect the development progress. Annual reports are to be distributed to the broad public to enable discussion and put local officials under pressure to sustain to the long-run objectives.

To monitor economic development annual economic indicators must be calculated. Indicators should be efficient, flexible and adequate in order to reveal whether the development process improves or stagnates. For instance, the Orange County Business Council selects community indicators that meet the following criteria (Orange County Indicators Report, 2001):

- Reflect the fundamental factors which determine long-term regional health
- Can be easily understood and accepted by the community
- Are statistically measurable on a frequent basis
- Measure outcomes, rather than inputs
- Illustrate countywide interests and impacts as defined by impacting a significant percentage of the population
- Include the categories of economic development, technology, education, health and human services, public safety, environment, and civic engagement
- Reflect data that is both reliable and available over the long-term

2.4 Organization of regional marketing programs

Regional marketing should be embedded in a management-oriented local government structure. Here, local decisions should be made under involvement of non-public stakeholders and encourage citizen participation. Simon (2001, p. 8) defines regional management as an integrative overall approach to implement marketing objectives. Characteristics of regional management are:

- Dynamic and process-oriented conceptualization
- Assignment-oriented behavior
- Action-based project planning
- Technical problem-solving
- Empowerment instead of regulation
- Supporting regional strengths
- Citizen and interest groups involvement
- Integrative and coordinative leadership

In order to organize a regional marketing program, local governments usually set up or take part in economic development agencies, business councils or independent non-profit institutions that aim at inducing corporate investment into the region. Those agencies vary in terms of their forms of incorporation, tasks, powers, independence and political responsibility (Kemp et al. 1995, p. 37ff). Some can only be seen as promotion agencies that distribute information to prospect investors, in contrast to others that have full planning and implementing powers.

2.4.1 Forms of economic development organizations in the USA

Before the 1960ies, economic development used to be primarily the issue of the local chamber of commerce. In some cases, a small economic development office within the municipal planning office supplied facts and figures. Retaining and attracting big industrial job producers was more often a State than a local responsibility. Nowadays, those patterns have changed and a wide spectrum of organizing economic development agencies has emerged.

At the one extreme there are non-profit economic development committees that are only partly funded by federal or national governments. They can act rather independently at the cost of a loose relationship to local public officials. Still, many of those non-profit quasi-public corporations have an extremely close relationship with the local government, such as the Baltimore Economic Development Corporation BEDCO (Kemp 1995, p. 39). Some other agencies are governed by boards, which are completely consisting of private sector representatives. A mixture is rather typical, where half of the members are appointed by the city hall and the other half by the local business community.

At the opposite end of the spectrum are those economic development departments that remain an integral part of the local government. Here, members are public officials and thus strongly influenced by the local government. The model in this case is Portland, Oregon, which in 1973 merged five offices and commissions into one umbrella agency (Kemp 1995, p.40).

Both types have their strengths and limitations. The form that works best in a particular jurisdiction is a function of many local factors, including community size, economic circumstances, development objectives and the level of commitment of public and private sectors to economic improvement. According to the National Council for Urban Economic Development (CUED, Washington D.C.) the public approach works well in cities where the local government has given a high priority to economic development and the private sector is already actively involved - as it is in St. Paul, Minnesota for example. In contrast, a quasi-governmental corporation is more effective in communities where economic development issues compete with other public agendas for scarce public dollars. It is also more often used in those localities where the private sector is uneasy about working together with the local government directly, as usually the case in many Californian cities.

More and more US jurisdictions choose the quasi-public approach, as Orange County does. This structure provides more flexibility and freedom when it comes to implementation of incentives. Powers are less restrained by legal procedures of the city charter than a public department's would be. Also, those corporations are not required to accept the lowest-bid, which makes it easier to outsource activities. A quasi-governmental institution takes less time to gain the trust of private business than public counterparts and they are not directly affected by political changes. Response to projects or problems can be done without administrative delay, such as official approvals, when time is crucial. Another advantage is that a separate corporation is not subject to the local civil service recruitment system. Thus, it is easier to hire experienced well-trained people without restrictions and offer salaries that are competitive to the private sector. In the US public employment is usually much less paid than private for the price of more job security.

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