Cost-effectiveness of Establishing Overseas Offices

Meeting: 
Plenary on 2007-01-17
Session date: 
January 17, 2007
Reference: 
2007/0004
Question By: 
Damian Hockney
Organisation: 
One London Party
Asked Of: 
John Ross, Murziline Parchment & Simon Fletcher

Question

Do you consider that opening overseas offices is the most cost-effective way of promoting London's international interests?

Answer

Answer for Cost-effectiveness of Establishing Overseas Offices

Answer for Cost-effectiveness of Establishing Overseas Offices

Answered By: 
John Ross, Murziline Parchment & Simon Fletcher

This question and answer session did not go ahead. However the following written answer was provided after the meeting:

The minimum return on investment set by the GLA group across its promotional and advertising work is 4 to 1 - that is each £1 spent must produce £4 of promotional or advertising value. On that the establishment of international offices as one of the most cost effective forms of international promotion of London in emerging markets due to the fact that high quality staff can be secured at substantially lower rates than in the UK or markets such as the US or Europe. As this allows us to have a year round presence working on a wide range of issues - inward investment, tourism, foreign students, film this is very cost effective. The standard establishment is one senior representative and one administrative assistant.

Based on our experience, and that of Think London, an office abroad costs around £100,000. To give a scale of comparison each job created in London generates an average of £40,000. That is if each international office were to generate just 3 jobs in London it would pay for itself - in reality of course their impact is very much greater.

The exception to the size of office is in Beijing where we deliberately decided to open a significantly larger office due to it staging the Olympic Games in 2008 and the interrelations of this with the London Olympics in 2012. We have offered LOCOG space in the Beijing office and negotiations are taking place about this. For the same reason it was decided to retain 4 staff in Beijing rather than 2.

However even with the exceptional cost of the Beijing office, which is justified by the cost of the Olympics, if our offices in China create 9 jobs in London, from the most rapidly growing economy in the world, they will pay for themselves. That is a stunning return with very low risk.

In contrasting marketing and promotion campaigns mounted from outside a country have a high return on investment but are much more expensive to operate. (For example the combined promotion of China in London and London in China in 2006 yielded almost £8 million in publicity value.) Also we cannot sustain large scale campaigns with prolonged impact in vital markets such as India and China for prolonged period from outside the country - the cost would be prohibitive.

For that reason offices in a country where skilled labour costs are low are extremely good value - that is of course why so many companies are interested in them!