June 2007 Ministry of Agriculture, Food and Rural Affairs
Using Community Economic Analysis for Strategic
Decision MakingStephen Morris, M.A.E.S., Ec.D.Community Economic Analysis SpecialistEmail: [email protected]: www.reddi.gov.on.ca
Ontario Ministry of Agriculture, Food and Rural Affairs
Session Objectives
At the end of this session, you will understand:
• How Community Economic Analysis (CEA) can support a BR+E initiative
• Be familiar with two types of analysis (there are many others!)
• Sources of Information
Ontario Ministry of Agriculture, Food and Rural Affairs
What is Community Economic Analysis (CEA)?
• Community Economic Analysis is using data to:– Identify & understand local conditions and trends– Assess the size & performance of local industries
• Sets the context for local economic development strategies
How Can CEA Support BR+E?
Project Implementation Process:
Stage 1: Project Planning & Business Survey
Stage 1: Project Planning & Business Survey
Stage 2: Immediate Follow-up
Stage 2: Immediate Follow-up
Stage 3: Data Analysis
& Recommendations
Stage 3: Data Analysis
& Recommendations
Stage 4: Public Meetings & Consultations
Stage 4: Public Meetings & Consultations
Can assist with project planning
Can assist in data analysis process
Ontario Ministry of Agriculture, Food and Rural Affairs
The Ultimate BR+E Program
• The ultimate BR+E Program would visit every business in the community.
• Due to time and budget limitations it is not possible to survey all businesses.
• A “sample” of businesses is used.
How did you select those businesses? Why?
Ontario Ministry of Agriculture, Food and Rural Affairs
Rules of Community Economic Analysis
1. Do not rely on any single piece of information or number generated by the analysis
2. Compare your community’s results with similar communities (pop’n, geog., industry, etc.)
3. Measure local economic trends over time to determine the direction of change
4. Use a variety of information sources
Putting Community Economic Analysis in Context
Competitive Advantage AnalysisCompetitive Advantage Analysis– Provides a broad picture of the local Economy– Reveals how business sectors are performing (I.e.
growing/declining) in the community
Community Business ProfileCommunity Business Profile– Provides a snapshot of the businesses in the community– Confirms the number and size of local businesses
BR&E SurveyBR&E Survey– Provides detailed information about the industries and
business operating in your community
General
Specific
Ontario Ministry of Agriculture, Food and Rural Affairs
Competitive Advantage Analysis
• Provides a broad picture of the local economy, and reveals how business sectors are performing (I.e. growing/declining) in the community
• Identifies potential of business sectors for growth or retention targets
• Combines: Sector specialization (Location Quotient)
+
Trend analysis (Leading-Lagging)
=
Competitive Advantage Analysis
Ontario Ministry of Agriculture, Food and Rural Affairs
Location QuotientIs a simple employment ratio that measures specialization (strength) of of a sector
• It can indicate if sector is producing more than meets local needs (e.g. Ratios over 1.25)
• Or it can indicate for retail and services sectors if there is a potential gap (e.g. ratio less than 0.75)
Ontario Ministry of Agriculture, Food and Rural Affairs
Location Quotient Example
Jacobville, 2001 (pop. 6,000)
ManufacturingTotal Local jobs: 3,000
# local jobs in Manu: 600
% local jobs in Manu: 20%
% provincial jobs, Manu: 20%
Location Quotient =
20% ÷ 20% = 1 (medium)
Forestry & LoggingTotal Local jobs: 3,000
# local jobs in Forestry: 150
% local jobs in Forestry: 5%
% Ontario jobs, Forestry: 0.1%
Location Quotient =
5% ÷ 0.1% = 50 (very high)
Ontario Ministry of Agriculture, Food and Rural Affairs
Provides an assessment on the relative sector growth
1) How the performance of the sector compared to the overall economy.
2) How the local sector performance compared to the sector.
Leading - Lagging Analysis
Ontario Ministry of Agriculture, Food and Rural Affairs
Leading - Lagging Analysis
Provincial Sector: – “Leading” – if sector’s
growth exceeded provincial overall growth rate
– “Lagging” – if sector’s growth was lower than provincial overall growth rate
Local Sector: – “Leading” – if sector’s
growth was greater than provincial sector’s growth
– “Lagging” – if sector’s growth was lower than provincial sector’s growth
Ontario Ministry of Agriculture, Food and Rural Affairs
Competitive Advantage Analysis
Ontario Ministry of Agriculture, Food and Rural Affairs
Competitive Advantage Analysis
• Current Strength
• Emerging Strength
• Prospects limited by external trends
• Prospects limited by weak base & external trends
• High priority retention target
• Prospects limited by weak base & declining competitiveness
• Prospects limited by external trends & declining competitiveness
• Prospects limited overall
Industry Targeting ClassificationIndustries are classified into one of eight categories:
Competitive Advantage Analysis Example: Manufacturing in Jacobville
1) Does the location quotient indicate a specialization for the industry?YES
Current SpecializationNO
Not a Current Specialization
YES - Leading
HighPriority
RetentionTarget
CurrentStrength
Prospects limited due to external
trends
Prospects limited by external trends
& declining competitiveness
EmergingStrength
Prospects limited by
weak base & declining
competitiveness
Prospects LimitedOverall
Prospects limited by
weak base & external
trends
NO - Lagging NO - LaggingYES - Leading
YES -Leading
YES –Leading
YES – Leading
YES – Leading
NO – Lagging
NO – Lagging
NO – Lagging
NO – Lagging
2) Is the industry growing at a faster rate than the overall growth rate?
3) Is local employment in the industry growing at a faster rate than the overall growth rate for the industry?
Location Quotient - 1.92 (high)Location Quotient - 1.92 (high)YES
Current Specialization
2) Is the industry growing at a faster rate than the overall growth rate?
3) Is local employment in the industry growing at a faster rate than the overall growth rate for the industry?
3) Is local employment in the industry growing at a faster rate than the overall growth rate for the industry?
1) Does the location quotient indicate a specialization for the industry?YES
Current SpecializationNO
Not a Current Specialization
YES - Leading
HighPriority
RetentionTarget
CurrentStrength
Prospects limited due to external
trends
Prospects limited by external trends
& declining competitiveness
EmergingStrength
Prospects limited by
weak base & declining
competitiveness
Prospects LimitedOverall
Prospects limited by
weak base & external
trends
NO - Lagging NO - LaggingYES - Leading
YES -Leading
YES –Leading
YES – Leading
YES – Leading
NO – Lagging
NO – Lagging
NO – Lagging
NO – Lagging
Location Quotient - 1.92 (high)Location Quotient - 1.92 (high)YES
Current Specialization
Manufacturing sector grew at 12.7% compared to
an Overall Growth rate of 12.5%
Manufacturing sector grew at 12.7% compared to
an Overall Growth rate of 12.5% YES - Leading
2) Is the industry growing at a faster rate than the overall growth rate?
Competitive Advantage Analysis Example: Manufacturing in Jacobville
3) Is local employment in the industry growing at a faster rate than the overall growth rate for the industry?
1) Does the location quotient indicate a specialization for the industry?YES
Current SpecializationNO
Not a Current Specialization
YES - Leading
HighPriority
RetentionTarget
CurrentStrength
Prospects limited due to external
trends
Prospects limited by external trends
& declining competitiveness
EmergingStrength
Prospects limited by
weak base & declining
competitiveness
Prospects LimitedOverall
Prospects limited by
weak base & external
trends
NO - Lagging NO - LaggingYES - Leading
YES -Leading
YES –Leading
YES – Leading
YES – Leading
NO – Lagging
NO – Lagging
NO – Lagging
NO – Lagging
Location Quotient - 1.92 (high)Location Quotient - 1.92 (high)YES
Current Specialization
Manufacturing sector grew at 12.7% compared to
an Overall Growth rate of 12.5% .
Manufacturing sector grew at 12.7% compared to
an Overall Growth rate of 12.5% .YES - Leading
2) Is the industry growing at a faster rate than the overall growth rate?
Local employment in Manufacturing declined by 5.6% compared
to the sector which grew by 12.7%.
Local employment in Manufacturing declined by 5.6% compared
to the sector which grew by 12.7%.
NO – Lagging
3) Is local employment in the industry growing at a faster rate than the overall growth rate for the industry?
HighPriority
RetentionTarget
Competitive Advantage Analysis Example: Manufacturing in Jacobville
Classification Decision Tree(McLean & Voytek)
1) Does the location quotient indicate a specialization for the industry?YES
Current SpecializationNO
Not a Current Specialization
YES - Leading
HighPriority
RetentionTarget
CurrentStrength
Prospects limited due to external
trends
Prospects limited by external trends
& declining competitiveness
EmergingStrength
Prospects limited by
weak base & declining
competitiveness
Prospects LimitedOverall
Prospects limited by
weak base & external
trends
NO - Lagging NO - LaggingYES - Leading
YES -Leading
YES –Leading
YES – Leading
YES – Leading
NO – Lagging
NO – Lagging
NO – Lagging
NO – Lagging
2) Is the industry growing at a faster rate than the overall growth rate?
3) Is local employment in the industry growing at a faster rate than the overall growth rate for the industry?
Ontario Ministry of Agriculture, Food and Rural Affairs
Limitations of Competitive Advantage Analysis
• Time period 1996 - 2001• Based on Census responses • Employment by place of residence (doesn’t accurately reflect local
business mix)
• Results based on employment, some sectors becoming more capital / technology intensive may show decline in employment despite higher productivity
Ontario Ministry of Agriculture, Food and Rural Affairs
Community Business ProfileUsing Canadian Business Patterns data• Provides a snapshot of the businesses in
the community
• Confirms the number and size of local businesses by sector
• Data collected June & December each year; very current
Ontario Ministry of Agriculture, Food and Rural Affairs
Ontario Ministry of Agriculture, Food and Rural Affairs
www.reddi.gov.on.ca• Choose 3 levels of geography
• 5 Types of Analysis (Competitive Advantage, Community Business Profile, Labour Flow, Retail Sector, Socio-Economic)
• Select all sectors or one sector for an area…and level of industry (1, 2, 3 digit)
• compare selected community with others in province, region, or of similar population
• Produce charts and colour maps
Ontario Ministry of Agriculture, Food and Rural Affairs
http://censtats.census.gov/cbpnaic/cbpnaic.shtml
U.S.- County Business Patterns
Ontario Ministry of Agriculture, Food and Rural Affairs
CEA is more Art than Science
Data is retrospective, “like driving while looking in the rear view mirror”
Ontario Ministry of Agriculture, Food and Rural Affairs
Summary
CEA informs BR&E by:
• Identifying the structure and size of local sectors
• Identifying local and regional trends (growth/decline)
• Highlights sectors that are vulnerable
• Highlights local sectors that have growth potential
June 2007 Ministry of Agriculture, Food and Rural Affairs
Using Community Economic Analysis for Strategic
Decision MakingStephen Morris, M.A.E.S., Ec.D.Community Economic Analysis SpecialistEmail: [email protected]: www.reddi.gov.on.ca