Question

Spire is a nanosatellite and data analysis company based out of San Francisco. The company specialises in gathering unique data from small satellites in a low-earth orbit. Spire collect this data, pull it down and through a network of ground stations, and sell the Spire opened its European headquarters in Glasgow, Scotland. Data, like that provided by Spire’s nanosatellites, can be the key factor in fighting the extreme and unpredictable weather events that cause so much destruction globally.

Scotland has a well-known reputation for providing a first-class welcome to all its visitors and Spire management were very impressed by the warm and open reception they received from the Scottish Government agency. CEO and Co-founder Peter Platzer stated 'Where Scotland won out was the access to risk capital, the flexibility and, importantly, the Scottish Government’s eagerness to support innovative companies – this really stood out here’. His vision when he co-founded Spire was to be able to provide satellite powered data from any location on earth. He also claims that his staff are very pleased; ‘We had a number of overseas staff come here for a temporary position to help set up who have since decided that they want to stay here permanently. Glasgow is a really great place to live and Scotland in general - our people really enjoy being here. The words friendly and hospitable are really not rich enough in meaning to describe the experience of being a part of everyday life here in Scotland’.

As well as the positive welcome and help that they have had to settle into life in Scotland, Spire management also point out that a key factor in their location decision was the access to a talented work force. ‘When we looked at Scottish staff, we found that the passion for what they do, their character and work ethic, is absolutely world-class’.

Questions

1. Why did Spire choose to locate in Scotland?

2. Why do companies set up overseas manufacture and service operations?

3. Are reduced labour costs the main reason for relocation?

Answer 1

ANSWER-

1.Scotland has a well-known reputation for providing a first-class welcome to all its visitors and Spire management was very impressed by the warm and open reception they received from the Scottish Government agency.CEO and Co-founder Peter Platzer stated 'Where Scotland won out was the access to risk capital, the flexibility and, importantly, the Scottish Government’s eagerness to support innovative companies – this really stood out here’.

2.Overseas manufacturing, because it is less expensive, allows for goods to be produced in very large volumes. Volume ensures that businesses and companies are able to meet their market needs every time. The ability to consistently mass-produce and meet demand is crucial to a company's success.

3. Yes this is a reason for relocation.

1- To acquire more room. The No. 1 reason a company will move to another facility is because their current facility no longer has enough space for them to do the things they need to do. One of two factors comes into play: either the surrounding property does not have enough open space to accommodate a physical expansion of the building, or management has determined that such a facility expansion on the existing site would not be cost effective.

2 — To lower operating costs. While the need for more space may be the No. 1 reason, right behind it is the fact that high operating costs have made a company or plant uncompetitive. Sometimes it’s the cost of labor: average salaries, benefits, workers comp and unemployment insurance costs, etc. Or it could be the onerous environmental regulations, or high taxes.

3 — To modernize equipment and facilities. Sometimes a company’s existing facility, its equipment, or both, have become so antiquated that the company is put at an impossible disadvantage compared to its competitors.

4 — To move closer to a large segment of their market, or to establish a presence in a new market. Long distances to market mean two things: time and money. If a significant portion of a company’s market is in a particular region, that company may be able to save a lot of money in transportation costs — and also reduce their product delivery times — by establishing an operation in that region.

5 — To consolidate into fewer facilities. Sometimes a company just has more manufacturing facilities than it needs.
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6 — To be closer to certain suppliers or natural resources. The same market forces that apply to a company’s customer base also apply to its suppliers. Long distances mean higher transportation costs and longer response times.

7 — To access a better or larger labor pool. These days labor is top concern expanding or relocating companies have when they look at locations. Sometimes, a company or facility grows to the point where the local community can no longer supply a work force in sufficient numbers and quality.

8 — To eliminate specific labor-related situations. Sometimes a company or facility is having a bad experience with unions — recent strikes, costly benefit packages, or whatever — and the only solution is to move as far away as they can.

9 — To be closer to similar-type companies (clustering). Many companies like to cluster around other companies within the same industry. Silicon Valley and Detroit are classic examples, but there are plenty of other examples all over the country.

10 — To improve quality of life. Some companies just want to improve their quality of life. This may be the personal choice of the owner for certain privately-held companies, or it may be to so that the company can better attract certain types of employees (engineers, scientists, graphic artists or whatever) by being in “high quality of life” location.