Exploring Opportunities for a Stronger Regional Economy

Module Five

Reflecting on the Previous Session

• What did you find most useful or valuable?• What progress have you made since then?• Any questions or clarification needed?

Overview of Module Five• Examine the concept of competitive

advantage• Explore tools and data to detect regional

competitive advantage• Investigate regional workforce and

industry trends

BASIC CONCEPTS OF COMPETITIVE ADVANTAGE

Competitive Advantage

Business shapes the economic value of a

region, but places can help shape, nourish,

and sustain local enterprises and

industry.

Competitive Advantage Elements

• Demand conditions• Factor conditions• Firm strategy, structure, rivalry• Related and supporting industry

Health Care

Industry

Firm Strategy:3 hospitals

7 full-time doctorsIndustry determined by

university-owned hospital, located 100 miles away

Demand Conditions: Unemployed and

underemployed seeking low-cost health care

Higher income leaving the region for large urban

hospital

Factor Conditions: Low rent

Inexpensive unskilled laborDifficult to retain medical

professionals

Related and Supporting Industry:

25% of durable supplies can be purchased locally

0% of non-durable supplies can be purchased locally

What value chains or

clusters exist in our region?

How many competitors?

What is the threat of new entry? Local customer

base? What do people want?

How does place influence the

quantity, quality and cost of input

factors?

TOOLS FOR DETECTING REGIONAL COMPETITIVE ADVANTAGE

Element One: Demand Conditions

What are some of the region’s demographic characteristics that may support or diminish demand for goods or services in the region?

Element Two:Factor Conditions

• Infrastructure• Quality of Life• Quality

Workforce Availability

Factor Conditions: Infrastructure

• Current leading employers • New/expanding companies • Research and development facilities• Available land and buildings• Telecommunications/Internet access• Cost of living• Access to transportation networks• Tax structure

Factor Conditions: Infrastructure Cost of LivingComposite Cost of Living (Scaled)

2nd Quarter 2010

Source: Missouri Economic Research and Information Center

Factor Condition: Infrastructure Basic Broadband Adoption, 2009

Source: Federal Communications Commission

Factor Conditions: Quality of Life

• Population and labor force• Education• Health care• Recreational opportunities• Shopping• Crime, weather, etc.

Quality of Life: Natural Amenities

Source: Economic Research Service, USDA

Quality of Life: Health Insurance, 2006

Who are the region’s workers? Skilled/unskilled Labor force participation rate Unemployment rate Occupation mix Experience/age

Factor Conditions: Workforce

Identifying Skills in the RegionEx

ampl

e: M

anuf

actu

ring

/

Employed by this Industry Occupation

Projected Growth

(2008-2018)Projected Job Openings

(2008-2018)

100% Pourers and Casters, Metal Decline rapidly 2900

100%Extruding and Forming Machine Setters, Operators, and Tenders, Synthetic and Glass Fibers

Decline rapidly 1500

99%Textile Winding, Twisting, and Drawing Out Machine Setters, Operators, and Tenders

Decline rapidly 5800

98% Computer-Controlled Machine Tool Operators, Metal and Plastic Average 36900

98%Lathe and Turning Machine Tool Setters, Operators, and Tenders, Metal and Plastic

Decline rapidly 9100

98% Textile Bleaching and Dyeing Machine Operators and Tenders

Decline rapidly 1700

Where is the Creative Class in the US?How "creatively-driven" is your economy compared to the national average?

Dark-blue is the least creative and dark-red the most creative areas.

The Creative Class

• Should be attracted and retained

• Develop, design, or create new applications, ideas, relationships, systems, or products

• Considered “footloose” • Attracted to amenities

Source: Florida, 2002

• What is the portfolio of businesses?• What does entrepreneurship look like?• What is the mix of industrial sectors?

Element Three:Firm Strategy, Rivalry, Composition

Industry Overview

Business and Industry

Size of Establishments

Source: http://www.youreconomy.org

Percentage Change in Net Jobs by Development Strategy

Source: http://www.youreconomy.org

Element Four: Related and Supporting Industry

Do industries buy and sell from each other regionally?

Are there any strong value chains in the region?

Value Chain Example

Grape stock

Fertilizers, Pesticides, Herbicides

Grape harvesting equipment

Irrigation technology

Specialized publications

Public Relations & Advertising

Labels

Caps & Corks

Bottles

Barrels

Winemaking equipment

Educational, Research & Trade organizations

Growers/Vineyards

Wineries/Processing

facilities

State government agencies

California Agricultural Cluster

Tourism Cluster

Food Cluster

Wine

Source: California Department of Food and Agriculture

Putting It All Together

Regional Competitive Advantage

Factor Conditions

Firm Strategy, Structure,

Rivalry

Related and Supporting Industries

Demand Conditions

Industry Clusters

Groups of similar and related firms in a defined geographic area that share common markets, technologies, worker skill needs, and that are often linked by buyer-seller relationships

Two Types of Clusters• Strong value chains

(Vertical clusters): working together toward a common product

• Competing (horizontal clusters): drawing from the same raw materials, infrastructure, labor force

Identifying Industry Clusters

• Views firms and industries as interdependent, not isolated

• Identifies value chains• Discovers collections of businesses

producing similar outputs

MAPPING THE CLUSTER

Cluster Choices• Advanced Materials• Agribusiness, Food Processing &

Technology• Apparel & Textiles• Arts, Entertainment, Recreation

& Visitor Industries• Biomedical/Biotechnical (Life

Sciences)• Business & Financial Services• Chemicals & Chemical Based

Products• Computer & Electronic Product

Manufacturing• Defense & Security• Education & Knowledge Creation• Electrical Equipment, Appliance

& Component Manufacturing

• Energy (Fossil & Renewable)• Fabricated Metal Product

Manufacturing• Forest & Wood Products• Glass & Ceramics• Information Technology &

Telecommunications• Machinery Manufacturing• Manufacturing Super Cluster (6

sub-clusters)• Mining• Primary Metal Manufacturing• Printing & Publishing• Transportation & Logistics• Transportation Equipment

Manufacturing

Examining Clusters in Your Region

Cluster Illustration: Bubble Chart

Source: EMSI.com

Clusters in the Region

Health Cluster

Behind the Bubble Chart

Cluster Jobs and Earnings

Distribution of Jobs

You Think There Is a Regional Cluster, So Now What?

• Map the cluster• Determine if growing or declining• Evaluate regional capacity• Identify potential leakages

& opportunities • Determine potential strengthening strategies

Homework for Next Time

• Identify the potential clusters for the region

• Read the “Import Substitution” flow chart to prepare for Module Six

Final Reflections What topics did you

find most helpful? What did you find

confusing? What other data do

you need? Other items you want

to mention?

Looking Ahead to Module Six• Identify the economic leaks in the region• Explore basic avenues for strengthening

clusters• Provide an overview of some specific

strategies within each avenue• Select potential directions for the region

to explore