Focusing on Regional Competitive Advantage

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• Investigate the elements that contribute

to regional economic advantage

• Explore regional data that may help identify regional clusters

• Select clusters for further exploration

EXPLORING COMPETITIVE ADVANTAGE

Competitive Advantage

Business shapes the economic value of a

region, but places can help shape, nourish,

and sustain local enterprises and

industry.

Exploring Competitive Advantage

Demand

Conditions

Factor Conditions

Firm Strategy, Structure, and

Rivalry

Related and

Supporting

Industry

Competitive Advantage Elements

Based on Porter’s Diamond Theory – Porter, M. (1990)

Demand Conditions

What conditions influence demand

for goods or services produced

in the region?

Demand

Conditions

Factor Conditions

Firm Strategy, Structure, and

Rivalry

Related and Supporting

Industry

Competitive Advantage Elements

Factor Conditions

• Infrastructure

• Resources & Materials

• Skilled Workforce

Demand

Conditions

Factor Conditions

Firm Strategy, Structure, and

Rivalry

Related and Supporting

Industry

Competitive Advantage Elements

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 Region

/

INSERT YOUR REGION’S CHART

LIKE THIS EXAMPLE HERE

• Region’s portfolio of businesses• Entrepreneurship activity and support• Mix of industries

Firm Strategy, Rivalry, Composition

Demand

Conditions

Factor Conditions

Firm Strategy, Structure, and

Rivalry

Related and Supporting

Industry

Competitive Advantage Elements

Business and Industry

INSERT YOUR REGION’S CHART

LIKE THIS EXAMPLE HERE

Related and Supporting Industry

Do industries buy and sell from each other regionally?

Do any strong value chains exist in the region?

Demand

Conditions

Factor Conditions

Firm Strategy, Structure, and

Rivalry

Related and Supporting

Industry

Competitive Advantage Elements

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/ProcessingFacilities

State Government Agencies

California Agricultural Cluster

Tourism Cluster

Food Cluster

Wine

Source: California Department of Food and Agriculture

OVERVIEW OF INDUSTRY CLUSTERS

Industry Clusters Defined

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

• Value chains (Vertical clusters): working together toward a common product

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

Auto Industry

Software Industry

Identifying Industry Clusters

• Views firms and industries as interdependent, not isolated

• Identifies value chains• Discovers collections of businesses

producing similar outputs

Overview of Clusters in Your Region

Understanding ChangesMoving Up or Down

Change in Percentage of

Jobs in Industry over Time

Understanding ChangesMoving Left or Right

Relative Concentration of Industryin the Region Compared to the Nation

Understanding Changes

EmergingGrowth in % Jobs over Time

Lower Concentration of Industry in Region

StarsGrowth in % Jobs over Time

Higher Concentration of Industry in Region

TransitionalDecline in % of Jobs over Time

Lower Concentration of Industry in Region

Mature

Decline in % of Jobs over Time

Higher Concentration of Industry in Region

Location Quotient: Measure of Concentration of Industry

Per

cen

t C

han

ge

in J

ob

s o

ver

Tim

e

Regional Clusters: 2002-2007INSERT YOUR

REGION’S CHART LIKE THIS

EXAMPLE HERE

Regional Clusters: 2006-2011INSERT YOUR

REGION’S CHART LIKE THIS

EXAMPLE HERE

Behind the Bubble Chart

Location Quotient more than 1 = Concentration

INSERT YOUR REGION’S CHART

LIKE THIS EXAMPLE – Move line to divide 1+ LQ

Behind the Bubble Chart

Industries with Greatest Percentage Growth

INSERT YOUR REGION’S CHART

LIKE THIS EXAMPLE – Adjust red circles to top 5

Examining the Leaky BucketThe Regional

Economy

Goods or Services Purchased outside

the Region$

Looking at Regional ExpendituresINSERT YOUR

REGION’S CHART LIKE THIS

EXAMPLE

Regional Industrial Clusters: Digging Deeper

• Identify the industries within the cluster• Determine if growing or declining• Evaluate regional capacity• Identify potential leakages & opportunities • Determine potential strengthening strategies

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• Mining• Primary Metal Manufacturing• Printing & Publishing• Transportation & Logistics• Transportation Equipment

Manufacturing

Examining Clusters in the Region

What industries:• Seem worth exploring further? • Should the region avoid investing for the

future? • May be viable future regional industries? • Are declining but may be worth reviving?

Homework for Next Time

• Identify the potential clusters for the region

• Read the “C.A.R.E. for the Region” 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