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Title: State of the Sunnyvale Economy, Business Climate


1
State of the Sunnyvale Economy, Business
Climate Economic Vitality Strategies
  • Prepared by Munroe Consulting, Inc.
  • Dr. Tapan Munroe, President
  • Seth R. Freeman, Senior Consultant
  • January 2001

2
Table of Contents
Section I Where Are We Today?
Section II How Are We Doing?
Section III The Future?
24 The importance of an Integrated
Strategy 25-32 Strategic Options for Sustained
Economic Vitality 33-34 Future Research 35
Conclusion
4 Introduction 5-6 Munroe Consulting Inc.
Investigative Process 7-8 New Economy in the
City of Sunnyvale 9-14 Overview of the City of
Sunnyvale Economy
16 What Business Thinks About Sunnyvale 17-18
Business Size Understanding Different
Perceptions and Needs 19-22 Market Forces
Silicon Valley Economic Threats
3
Section IWhere Are We Today?The City of
Sunnyvale Economy
State of the Sunnyvale Economy, Business
Climate and Economic VitalityJanuary 2001
4
Introduction
  • This report is intended to synthesize two 1999
    investigative research studies performed by
    Munroe Consulting Inc., Assessing Sunnyvales
    Economic Prosperity Program and Assessment of
    the Sunnyvale Economy as well as incorporate
    the results of community discussions held after
    the distribution of these reports. This
    integrated research process has yielded a
    significant base of knowledge, enabling
    policy-makers and stakeholders to understand the
    expectations and perceptions of the City of
    Sunnyvale business community as well as the
    nature of the Sunnyvale Economy.
  • The key learning from this process was that size
    of business, rather than just industry category
    should be a key consideration for future
    strategic planning. Businesses are concerned
    about the quality of life in the community. In
    addition to providing the highlights and key
    findings resulting from this three part project,
    this report provides program recommendations for
    the City of Sunnyvales economic vitality .
  • This report, along with on-going monitoring and
    research shall serve as the foundation for the
    City of Sunnyvales future design and
    implementation of strategic initiatives that
    ensure its continuing economic vitality.

5
The Investigation Process
Research
Analysis
Dialogue
Assessment of the Economic Prosperity Program
Assessment of the Sunnyvale Economy
Community Stakeholder Discussions
RECOMMENDATIONS STRATEGIES
6
Summary of Research Design Methodology
Assessment of the Economic Prosperity Program
  • Primary and secondary economic research and
    analysis.
  • Interviews (206) of top executives, high and
    mid-level managers and entrepreneurs representing
    corporations and businesses of various sizes
    currently doing business in Sunnyvale.
  • Statistically stratified random sample based
    upon number of employees made it possible to
    identify and analyze differences between small,
    medium and large firms.
  • Telephone interviews and fax questionnaires.
  • Community public forums and staff feedback on
    preliminary findings.
  • Review and assessment of prospective strategic
    alternatives.

7
Sunnyvale in Transition Defining the Old and
New Economy City
New Economy
Old Economy
  • Driven by these key industries
  • Semiconductors
  • Computers
  • Software
  • Internet
  • Telecommunications
  • Biotechnology
  • Soft and Intangibles
  • Information
  • Intellectual Capital
  • Relationships
  • Communication
  • Networks
  • Global
  • Flexible Adaptable
  • Driven by four key industries
  • Automobiles
  • Machine Tools
  • Construction
  • Retailing
  • Hard and Tangible
  • Steel
  • Oil
  • Lumber
  • Localized
  • Rigid Mass Produced

8
The Economic Landscape Today
Sunnyvale has key top-line economic growth
indicators that many U.S. cities would like to
mirror.
  • Between 1992 and 1998 City of Sunnyvale
    revenue grew at an annual 3.7 rate.
  • Total Number of jobs increased 22.6 between
    1992-2000.
  • Wages increased by 12.8, while taxable sales
    increased by 6.9.
  • As of October, 2000 Sunnyvale had 9,096
    businesses of which 2,541 are home based.

Sunnyvales New Moffet Park Building
9
Sunnyvales Economic Profile
  • Key observation Sunnyvales economy is less
    diversified than the overall Bay Area.
  • Sunnyvales manufacturing sector represents over
    one-half of its economy and is larger on a
    percentage basis as compared to the overall Bay
    Area.
  • Retail and Services are lower as a percentage of
    the Sunnyvale economy as compared to the Bay
    Area.
  • Departures or down-sizing of manufacturers from
    Sunnyvale will have a significant impact on the
    Sunnyvale economy.

10
Sunnyvale Employment is Highly Stratified
  • Key Findings
  • 44 of Sunnyvale employees work at firms that
    employ 500 or more workers.
  • These large firms represent only .38 of the
    total number of Sunnyvale firms.
  • 24 Sunnyvale companies employ nearly 40,000
    workers, with aggregate sales of 8 Billion.
  • A net relocation loss of a few large firms would
    dramatically reduce the number of jobs and tax
    revenue in Sunnyvale.

11
Details of Sunnyvale Services
Key Observations
  • The three largest services categories comprise
    1,531 or 65 of all Sunnyvale services firms and
    employ 21,311 or 75 of all Sunnyvale
    services workers.
  • Business services firms employ a
    disproportionately higher percentage of Sunnyvale
    workers.
  • Personal services firms, comprise 10 of
    Sunnyvale businesses employing only 2.3 of
    workers, indicating that most personal
    services firms employ few people.

12
Details of Sunnyvale Manufacturing
Key Observations
  • Top four industries comprise 504 firms employing
    90 (34,052) of all manufacturing employees.
  • Electronic equipment manufacturers with 231
    firms, represent 32 of all manufacturing firms,
    employing 12,619 or 33.2 of Sunnyvale
    manufacturing workers.
  • Transportation manufacturing represents 15
    firms, yet employs 10,223 or 27 of all
    manufacturing employees.
  • Printing and publishing rank the fifth largest
    number of manufacturing companies (78 firms) but
    employ 776 workers.
  • Three primary metals firms employ 645 Sunnyvale
    workers.

13
Details of Wholesale Retail
Key Observations
  • Restaurants and bars comprise the largest number
    of retail businesses (231) and employee the
    largest number of retail employees (2,952) in
    Sunnyvale.
  • General merchandise stores (9) represent 1 of
    Sunnyvale retail businesses yet employ 8 (556)
    of all retail sector employees.
  • Apparel and accessory stores represent 11 (65)
    of Sunnyvale retail firms, and employ 5 (350)
    of retail workers.

14
Location, Location, Location
  • As the worlds leader of high technology and
    innovation, the City of Sunnyvale has been a
    major beneficiary of Silicon Valleys sustained
    regional economic development.
  • Unique competitive advantage that can be best
    described by the well-known axiom of the real
    estate industry location, location, location.
  • City of Sunnyvale has been successful in creating
    a robust economic environment.
  • Enjoys an overall positive perception by business
    and civic stakeholders.
  • The convergence of economic, geographic and
    demographic conditions led to Silicon Valleys
    preeminence with Sunnyvale in the center of this
    activity.
  • Sunnyvales location must not be taken for
    granted.
  • Lack of affordable housing, congestion and
    skilled work force shortages due to Silicon
    Valley prosperity are major Sunnyvale problems.
  • Global, national and regional market forces are
    eroding the importance and desirability of
    locating in Sunnyvale.

15
Section IIHow Are We Doing?Business
Perceptions Economic Threats
State of the Sunnyvale Economy, Business
Climate and Economic VitalityJanuary 2001
16
Business Gives Sunnyvale High Ratings
  • The local economy is vibrant and doing well (89
    agreed).
  • Sunnyvale is a great place to do business (83
    agreed).
  • Sunnyvale business climate is meeting
    expectations (78 agreed).
  • Sunnyvale is doing an excellent job in fostering
    and improving the business climate (64 agreed).

Overall Business Climate
Q 2.10 The overall business climate in Sunnyvale
for your firm/organization.
17
But Business Size Really Does Matter
  • While the overall numbers are appealing, our
    research determined a striking difference between
    perceptions and expectations from smaller (under
    50 employees) and larger (over 50 employees)
    Sunnyvale businesses

Over 50
employees
employees
  • 17 of larger employers agreed that the Sunnyvale
    business climate is meeting expectations.
  • 26 of larger employers agreed that the City of
    Sunnyvale is a great place to do business.
  • 10 of larger employers agreed that Sunnyvale is
    doing an excellent job in fostering and improving
    the business climate.
  • Larger businesses are more likely to relocate
    from Sunnyvale than smaller businesses.

Q.7.0 How satisfied are you with the current
efforts by the City of Sunnyvale to promote a
favorable business climate?
Source Tapan Munroe, Inc.
Significant Differences based upon Size of Company
18
Understanding the Differences is Key to Creating
Effective Strategies
  • Larger businesses are less satisfied than small
    and medium businesses.
  • Larger businesses are less anchored to their
    Sunnyvale location.
  • Larger businesses have the economic strength to
    vote with their feet and relocate to
    alternative locations.
  • Survey results illustrate the importance of
    developing proactive business retention programs
    directed to these important corporate citizens.

19
Market Forces Diminish Importanceof Locating in
Silicon Valley
  • Globalization of the key industries and firms
    presently located in and around the City of
    Sunnyvale.
  • Relocation of administrative, research and
    manufacturing away from California and to foreign
    countries.
  • Quality of Life issues such as high housing
    prices and lengthening commute times.
  • New clusters of technology businesses in greater
    Bay Area and the Western United States.
  • Maturing Silicon Valley businesses requiring new
    or different costs structures, business
    infrastructure, logistics, city services.
  • Local government must formulate new policies and
    service protocols to meet the changing demands of
    both business and residential constituencies.
  • City of Sunnyvale must be proactive in developing
    and implementing key initiatives that are
    responsive to the changing business environment.

20
Key Forces _at_ Work
Local, Regional Global Threats
Top Sunnyvale Employers Can Shift Local
Operations to Lower Cost Regions
Sunnyvale Median Home Prices Near 500,000
The 101 Commute is Californias Most Congested
with 28,780 Daily Delay Hours out of 112,000
total delay hours in the State of California In a
recent survey, 87 of Employees would take a pay
cut for shorter commutes. SourceCaltrans
Advanced Micro Devices, Inc. Applied Signal
Technology, Inc. Amdahl Corporation Computer
Curriculum Corp. Cupertino Electric ,
Inc. Digital Equipment Corporation Lockheed
Martin Corporation Maxim Integrated
Products National Semiconductor Corp. Network
Appliance, Inc. Northrop Grumman
Corporation Spectrian TRW
Home prices in Santa Clara County are now the
third most expensive in the United States source
Wall Street Journal, 2000
21
Silicon Valley Issues Impact Sunnyvale
The Silicon Valleys economic success and the Bay
Areas overall strong economy have created
serious economic conditions in the City of
Sunnyvale that generally mirror those in other
Bay Area cities
  • Affordable Housing This is the single highest
    concern indicated in the surveys.
  • Transportation The desire for a better
    transportation system rather than merely
    improvements.
  • Future Work Force Development The critical need
    to broadly provide effective education and
    vocational training at all levels.
  • Government Services Provide high quality public
    safety and improved services to business.

Sources Center for Urban Analysis, Congestion,
Management Program/VTA. City Planning Departments
22
Growth in New Regional Technology Business
Clusters Threaten Sunnyvale
Internet, Telecommunication, High Technology
Manufacturing, and Multimedia Companies with more
than 5 Employees in the East Bay.
  • Silicon Valley industry clusters are expanding
    beyond the greater Sunnyvale area.
  • WHY?
  • More affordable housing costs.
  • Less congestion and shorter commute times.
  • Availability of labor pools.
  • Lower business occupancy costs.
  • The continued development of new regional
    technology clusters erodes the City of
    Sunnyvales comparative advantage.
  • This highlights the need for proactive programs
    geared to business retention.

Source Munroe Consulting Inc., Dun Bradstreet,
Employment Development Department, Grubb Ellis
23
Section IIIThe Future?Strategic Options
State of the Sunnyvale Economy, Business
Climate and Economic VitalityJanuary 2001
24
An Integrated Strategy Increases City Visibility
with Stakeholders
Regional Participation
City of Sunnyvale
Large Businesses Organizations
Small Medium Size Businesses
Local Sunnyvale Specific Actions
25
Key Strategies for Success in Protecting
Sunnyvales Economic Vitality
  • Develop and support policies and practices that
    achieve planned economic diversity.
  • Design programs that acknowledge differences in
    requirements and perceptions of smaller and
    larger businesses.
  • Communicate, outreach and marketing the benefits
    of business in Sunnyvale and the importance of
    business to the community.
  • Regional Actions Utilize regional and local
    strategies so that decisions and programs add
    value to the Sunnyvale business community.
  • Develop local/Sunnyvale specific actions that can
    be measured and contribute to regional solutions.
  • Develop working relationships between and among
    the City business community and residents through
    Local/Sunnyvale specific actions.
  • Continually research and monitor local economic
    conditions and business community perceptions
    allowing for timely proactive response from City
    of Sunnyvale government and policymakers.

26
Sunnyvales Economic Vitality Strategiesfor
Success in the New Economyas Well as in the
Next Economy
  • Sunnyvales Economic Prosperity Program should
    be structured in a fashion that incorporates a
    sensitivity to perceived needs that differ
    according to size of business.
  • Assessing Sunnyvales Economic Prosperity
    Program and its Business Climate, September,
    1999, Page 13

Both perceptions and expectations among
executives and principals of firms doing business
in Sunnyvale today are driven largely by size of
business.
27
STRATEGY 1 Implement a two-tiered strategy
based upon the perceptions expectations of two
different constituencies.
  • For Larger Businesses Organizations
  • Importance of geographic area is decreasing.
  • Being part of an industry cluster is more
    important.
  • Local tax costs are a significant concern.
  • Consider themselves more aware of City effort
    to enhance local business environment.
  • Public safety and fire services are an
    important issue.
  • They are not interested in city business
    location and financing services.
  • Employment training and/or placement is a
    major concern.
  • For Small to Medium-sized Businesses
  • Business Friendly regulation is important.
  • Attention to local telecommunications
    resources is important.
  • It is important to inform about Citys
    efforts to enhance local business environment.
  • Public safety and fire services are an
    important issue.
  • City assisted business location and
    financing services are important.
  • Employment training and/or placement are
    important.
  • Recognition and programs that support small
    office home office based businesses.

28
STRATEGY 2 Create and promote Industry
Cluster packages of bundled professional
services.
  • Develop and hold bi-annual forums for Sunnyvale
    area businesses to know about each others
    products and services in order to increase
    purchase of goods and services from the Sunnyvale
    area assuming that products offered are price and
    quality competitive. The Citys role here is
    that of a catalyst and a facilitator.
  • The focus of these forums needs to be on small
    and medium-sized services firms offering legal,
    accounting, consulting, engineering design,
    computer hardware, and software services as well
    as vendors who form part of the supply chain of
    manufacturing.

29
STRATEGY 2 (continued) Create and promote
Industry Cluster packages of bundled
professional services.
  • The City also needs to develop a Web-based
    information clearing house that lists business
    services and suppliers by Industry Clusters.
    This will save on search cost for firms in
    different industry clusters. It will encourage
    firms to approach a local firm before going out
    of the region for procurement of goods and
    services.
  • This program will allow the City of Sunnyvale to
    develop a valuable database on the local economy
    by industry cluster. This will enhance its
    ability to be more proactive in enhancing the
    economic vitality of the City consistent with its
    changing economic structure.

30
STRATEGY 3 Think and act regionally.
Influence Through Active Involvement in Regional
Business, Government Planning Organizations
  • Participate and support regional strategies that
    cross traditional City of Sunnyvale
    jurisdictional lines.
  • Be active in regional boards.
  • Establish working relationships with other
    regional agency and organization representatives.
  • Identify and leverage existing participation by
    Sunnyvale businesses on regional boards.
  • Be responsive to regional transportation system
    needs.
  • Be responsive to regional housing needs.
  • Lead and cooperate in establishing programs to
    mitigate the regional workforce development
    crisis.

31
STRATEGY 4 Implement Strong Communications,
Outreach Marketing
  • Use different forms of communication to
    effectively reach the target.
  • Tailor message and contact to the business
    audience.
  • Require direct contact with larger firms senior
    level policy makers and City managers.
  • Reach smaller firms through mass vehicles such as
    newsletters.
  • Create round-table events with different business
    groups defined by size and industry peers.
  • Work with businesses to involve them in the
    immediate neighborhoods.
  • Develop programs to involve businesses in
    community needs and events, creating ownership.
  • Promote contact between business and City
    government through creative Internet strategies.
  • Promote and publicize the Citys participation in
    regional events and programs.
  • Provide data to businesses indicating Sunnyvales
    positive performance against other cities and
    regions.
  • Demonstrate commitment to helping realize
    business expectations.
  • Manage expectations through regular contact.

32
STRATEGY 5 Bench-Mark Against Comparative
Locations is Critical
  • Conduct frequent surveys to determine how
    Sunnyvale measures up to comparative locations in
    terms of
  • Labor and space costs
  • Local taxes
  • Regulatory environment
  • Affordable Housing
  • Transportation
  • Availability of skilled worked force
  • Quality of life
  • How we are doingcompared to
  • Silicon Valley Cities
  • Bay Area Region
  • State of California
  • Western United States
  • Other New Economy U.S. Cities
  • International Technology Centers

33
City of Sunnyvale Doing Things Right
Specific examples of current and prospective
proactive initiatives that achieve long term
economic vitality include the following options
  • Housing
  • Below Market Rate Purchase and Rental (BMR)
    programs enhance economic diversity while
    creating opportunities to maintain local
    workforce.
  • City of Sunnyvale Affordable Housing Ordinance
    and Mitigation Fund.
  • Downtown development programs assist in creating
    economic diversity and new residential
    opportunities closer to work.

The City of Sunnyvale should be the proactive
catalyst for innovative solutions to the key
concern of finding and retaining a skilled
workforce. The issues - housing, education, land
use and transportation - are important to the
residents and to the business community. Both
groups need to create community partnerships to
improve the quality of life in Sunnyvale.
34
City of Sunnyvale Doing Things Right
  • Land Use
  • Promote redevelopment of older properties.
  • Update design guidelines to allow more
    flexibility while respecting neighborhood
    concerns.
  • Plan strategic use planning tools (FAR,
    set-backs, etc,) to manage development at Moffet
    Park and around light-rail stations.
  • Encourage higher densities at targeted locations.
  • Encourage mix of businesses by stimulating
    speculative and build-to-suit properties.
  • Transportation
  • Public/Private partnerships to address
    transportation problems.
  • Coordinate promote use of alternative
    transportation.
  • Plan and build new strategic light rail
    stations.
  • Encourage businesses to provide on-site
    employee services to reduce working hours
    trips.
  • Education
  • Provide educational programs that offer skills
    training required by local businesses.
  • Coordinate business sponsored programs.
  • Create an affordable housing initiative to
    attract and retain teachers Move in for Less.
  • Advocate a County-wide education task force to
    identify and implement coordinated programs with
    Silicon Valley chambers and business
    associations.

35
Future Research Needs
  • Local economic development strategies should
    focus on the citys strengths while addressing
    areas of regional concern.
  • Perform on-going monitoring of the local economy
    to allow for early identification of problems and
    time to make necessary adjustments in the Citys
    economic development strategies.
  • Conduct frequent surveys of large businesses to
    stay current on needs and issues.
  • Identify needs of small office and home-based
    businesses on a regular basis.
  • Monitor the direct relationship of City of
    Sunnyvale revenues to industry structure base.
  • Learn from other cities and regions facing
    similar economic challenges and economic threats.

36
CONCLUSION Develop proactive strategies that
capitalize on understanding of key market forces
  • In the past, economic forces such as those
    described in this report have tended to build
    slowly, providing ample opportunity for local
    governments to study issues.
  • Many cities fail to react to a changing economic
    environment until a major shock-event occurs,
    such as the announcement of the relocation of a
    major employer.
  • Lack of responsiveness results in a downward
    local economic spiral including loss of important
    local tax receipts.
  • Costly business retention mandates and economic
    (re)development subsidy programs are required to
    stimulate a turnaround.
  • Fast moving New Economy does not allow local
    governments to gradually implement changes over a
    long period of time.
  • City of Sunnyvale needs to embrace the important
    market knowledge that is available from this and
    other research.
  • Proactively lead and effectively execute
    thoughtful, effective strategic initiatives to
    sustain its strong current position and to enter
    the Next Economy.
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