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Regional Analysis of Industry Dynamics and Target Industry Identification

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Title: Regional Analysis of Industry Dynamics and Target Industry Identification


1
Regional Analysis of Industry Dynamics and Target
Industry Identification
  • Eric Rinehart
  • Economic Development Solutions, Inc.

E-D-Solutions.com
2
Contents
  • Industry Targeting Methods pp 2-3
  • Target Industry Data pp 4-5
  • Available Sector Data pp 6-7
  • Regional Analysis of Industry pp 8-12
  • Employment Growth
  • Income Sales Growth
  • Investment Growth
  • Practical Applications pp 13-14
  • Next Steps p 15

3
Industry Targeting
  • Uses statistics on industries as a technique for
    focusing economic development efforts.
  • Essentially, growth information is used to
    segment the industries into markets ...
  • To identify industry dynamics, in particular
    growth prospects and area/ industry compatibility
  • Thus, the data statistics to be collected is
    driven by the use requirements.

4
Why Identify Target Markets
  • Better Knowledge of Customers
  • Patterns and Dynamics of Growth
  • Limited Resources of Time and Money
  • Focus Energy and Efforts
  • Maximize Return on Investment and Results
  • Identify prospects vs. 1000s of direct mail

5
Industry Targeting Methods

Identifying the Common Themes
6
Daryl McKee Business Screen
  • 1st Screen for Attractiveness
  • national and regional growth rates
  • number of establishments, location quotients
  • 2nd Screen for Area Competitiveness
  • cost structure of location factors/inputs
  • supply (access) to locations factors/inputs

A Targeting Approach
7
Don Walls Associates
  • 1st Identify the Export base
  • Strong national markets (output/demand)
  • Strong international markets (export share)
  • 2nd Consider Forecast Growth Rate
  • 3rd Identify Illinois Advantage
  • Supplier channels (weighted avg. availability of
    inputs)
  • 4th Consider Benefit to the State
  • Enhanced productivity, (high output per worker)

A Targeting Approach
8
Ross Boyle
  • 1st Identify Probable Sources of New Investment
  • National and
  • Regional
  • 2nd Match Requirements to Community Capacity
  • Market Access
  • State Competitiveness
  • 3rd Identify those Most Desirable (Among those
    for which the area has an advantage)

A Targeting Approach
9
Eastern Seaboard Region
  • 1st Identify Industry Growth Prospects
  • Ten Year Employment Change
  • Current Employment and Establishments
  • 2nd Consider Industry Location Requirements
  • Industry Avg. Wage Gas/Electric Fuel Cost
  • 3rd Gauge Area Competitive Position
  • Payroll Costs State vs region
  • Value-Added, State vs region
  • 4th Determine Industry Benefit
  • State industry multipliers

A Targeting Approach
10
DRI Approach
  • 1st Consider Prospects
  • Could add a substantial number of relatively
    high-income jobs
  • Will find a significant market for its products
    inside and outside of Illinois
  • 2nd Consider Illinois Impacts
  • Have high inter-industry multipliers suggesting a
    larger total positive economic impact (GSP)
  • Can find many of its critical inputs (including
    labor) in the state
  • 3rd Consider the larger context
  • Are less volatile or have business cycles that
    are asynchronous with either the US or the state

A Targeting Approach
11
Common Elements
  • Identify Industries in the Export Base
    (significant sales to outside consumers)
  • Identify the Industries of Consequence
    (important enough or large enough in size to be
    a market segment)
  • Identify Prospective attractive Industries
    (strong national prospects potentially mobile)
  • Identify Compatible Industries (competitive
    community advantages)
  • Identify Industries Providing Community Benefits
    (positive potential impacts on the community)

and Common Development Questions
12
Mathematically Target Industry Sectors Í Market
Segments where
  • Ç EXPORT BASE SET
  • Ç CONSEQUENTIAL SET
  • Ç PROSPECTS SET
  • Ç COMPATIBILITY SET
  • Ç BENEFICIAL SET

13
Target Industry Data
14
Relate Data Collected to Goals
Type of Growth Statistics to Select
Primary Goals of Development
  • Jobs Created or Retained
  • Expenditure on Payroll
  • Investment in Plant/Equipment
  • Industry Employment Data
  • Industry Output and Income Data
  • Industry Investment Data

15
Data Collection Decisions Generally
  • Time Frame to calculate trend statistics
  • a base year and the most current year for past
    trends
  • Forecasts to estimate future scenarios
  • Data Sources to assure reliability
  • Public Co. Business Patterns, Annual Survey of
    Mfg.
  • Private American Business Info., Dun
    Bradstreet
  • Geographic Area of Analysis to make comparisons
  • U.S., Midwest, state, labor market, commuting zone

16
The Export Base Industries
Policy/Data Decisions in Defining the Market
Segments
  • By Inspection
  • Resource Based
  • Industrial Based
  • Innovation Based
  • Mathematically
  • Location Quotient gt 1.1
  • Export Share gt 50
  • Output/Demand gt .9

17
The Set of Consequential Industries
Policy/Data Decisions in Defining the Market
Segments
  • Quantity Measures
  • Amount of Employment
  • Amount of Output
  • Amount of Investment
  • Quality Measures
  • Skill of Labor
  • High Proportion Blue Collar
  • High Proportion White Collar
  • Output/Income
  • Output per Worker
  • Average Payroll or Wage
  • Job Skill Requirement
  • Labor Intensive low VA
  • Capital Intense high VA

18
The Prospects (Mobile) Industries
Policy/Data Decisions in Defining the Market
Segments
  • Historical Growth Rate (Relative)
  • Output,
  • Employment,
  • Investment
  • Projected Growth Rate (Relative)
  • Output,
  • Employment,
  • Investment

19
The Compatible Industries
Policy/Data Decisions in Defining the Market
Segments
  • Cost Minimization
  • Labor
  • Inputs
  • Capital
  • Profit Maximization
  • Employment
  • Output
  • Investment

20
The Beneficial Impact Industries
Policy/Data Decisions in Defining the Market
Segments
  • Goal Achievement
  • Income Goals Output Multiplier
  • Employment Goals Employment Multiplier
  • Investment Goals Investment Multiplier
  • Fiscal Impact
  • Income Goals Sales Taxes
  • Employment Goals Income Taxes
  • Investment Goals Property Taxes

21
Available Sector Data

Structure of the US Economy
22
Standard Industrial Classification
3-Digit 4-Digit
  • Agriculture 01-09 3 58
  • Mining 10-14 6 31
  • Construction 15-17 3 26
  • Manufacturing 20-39 136 456
  • TransCommUtilities 40-49 20 67
  • Wholesale Trade 50-51 2 69
  • Retail Trade 52-59 8 64
  • Fin Ins RE 60-67 7 53
  • Services 70-87 65 150
  • Public Admin. 90-97 0 27
  • Total 252 1002

23
North Amer. Industry Classification
  • Sector 11 111-115 Agriculture
  • Sector 21 211-213 Mining
  • Sector 22 221 Utilities
  • Sector 23 233-235 Construction
  • Sector 31-33 Manufacturing
  • Sector 42 421-422 Wholesale Trade
  • Sector 48-49 Transportation/Warehousing
  • Sector 51 Information (Communication)
  • Sector 52 Finance Insurance
  • Sector 53 Real Estate Rental Leasing

24
North Amer. Industry Classification
  • Sector 54 Professional Scientific
  • Sector 55 Management of Companies
  • Sector 56 Admin. Support Waste Mgmt
  • Sector 61 Educational Services
  • Sector 71 Arts Entertainment Recreation
  • Sector 72 Accommodation Food Service
  • Sector 81 Other Services
  • Sector 92 Public Administration

25
Employment Data
  • County Business Patterns http//www.census.gov/ep
    cd/cbp/view/cbpview.html
  • Employees Establishments Estab. by Employment
    Size
  • State Departments of Employment
    Securityhttp//..state.your state.us/
  • Establishments Number Employed by Geographic
    Area
  • Bureau of Employment Statistics
    http//stats.bls.gov/oes/oes_data.htm
  • Occupational Employment and Wage Estimates

26
Output and Income Data
  • Economic Census- Geographic Area Series
    http//www.census.gov/epcd/www/econ97.html
  • The Assets and Expenditures Survey 1992,
    www.census.gov/csd/bes/
  • Bureau of Economic Analysis Regional Accts
    http//www.bea.doc.gov/bea/regional/data.htmhttp
    //www.bea.doc.gov/bea/regional/articles.htm
  • Bureau of Econ Analysis Input Output
    Tableshttp//www.bea.doc.gov/bea/dn2/i-o.htm

27
Investment Data
  • Annual Capital Expenditures Survey 94- 97
    www.census.gov/prod/www/abs/ace-pdf.html
  • Statistical Abstract of the U.S Table No 897 Net
    Stock of Fixed Private Capital by Industry 90-97
    http//www.census.gov/statab/www/
  • Corp Income Tax Returns, Selected Balance Sheet,
    Income Statement, and Tax Items by Industrial
    Division and Asset Size. SOI Bulletin 96
    Summerwww.irs.gov/tax_stats/soi/corp_id.html
  • Bureau of Econ Analysis Fixed Asset
    Datahttp//www.bea.doc.gov/bea/dn2/facd.htm

28
  • Bureau of Economic AnalysisIndustry and Wealth
    Datahttp//www.bea.doc.gov/bea/dn2.htm
  • Industry and Trade Outlook http//www.ntis.gov/pro
    duct/industry-trade.htm

29
Regional Analysis of Industry and Basic Target
Industry Identification
First Use of the Data
Ç EXPORT BASE SET Ç CONSEQUENTIAL SET Ç
PROSPECTS SET Ç COMPATIBILITY SET Ç BENEFICIAL
SET

30
Define Data Manipulation Methods
  • Use Statistics to Screen for
  • Export Base Industries LQ e gt 1.1 or LQ va gt1.1
  • Consequential Industries Quantitative Measures
    e, va, i
  • Use Shift Differential to Plot Statistics on
  • X-Axis National Growth Prospects (Attractive
    Industries)
  • Y-Axis Area Advantage (Compatible Industries)
  • Z-Axis Industries Impact i.e. Community Benefit

Separate Detail Methods for Output, Employment
and Investment
31
Select Statistical Measures
Separate Measures for Output, Employment and
Investment
32
Collect and Format the Data
Separate Tables for Output, Employment and
Investment Data
33
Plot the Data
Industry Analysis Matrix
Area Compatibility (Competitiveness)
Quantitative Significance
National Prospects (Attractiveness)
Separate Scatterplots for Output, Employment and
Investment
34
Define Performance Categories
  • Vibrant Industrys growth in the United States
    and in your State exceed average
  • Growth Industry shows strong national growth
    and modest growth in the state
  • Stable Strong state growth but modest growth in
    the nation
  • Declining Industrys growth is low both in the
    U.S. and in your State

35
Plot Performance Categories
Area Compatibility (Competitiveness)
National Prospects (Attractiveness)
Separate Categories for Output, Employment and
Investment
36
Aggregate Data into Categories
  • Clusters Business Services, Durable Goods
    Consumer Goods Distribution etc.
  • Quality by wage levels and/or skill levels
    (high wage versus family wage industries)
  • Competitive Advantage resource-based
    capital-based service-based and
    information-based industry

Potentially Separate Aggregates for Output,
Employment Investment
37
Employment Growth Indicators
  • Export Base Industries Data/Indicator
  • Employment Location Quotient
  • Consequential Industries Data/Indicator
  • Absolute Employment Growth 1992-1997
  • Prospective Industries Data/Indicator
  • Industry Employment Differential
  • Compatible Industries Data/Indicator
  • Area Employment Differential
  • Beneficial Impact Data/Indicator
  • Employment Multiplier

38
The Industry and Area Differentials
  • Industry Employment Differential, is the
    difference between the national growth rate of
    industry i and the overall national growth rate.
  • Area Employment Differential, is the difference
    between the state growth rate of industry i and
    the national growth rate of industry i.

39
Employment Growth Suggested Data
40
Employment Categories Analysis
Area Compatibility Value (Competitiveness Area
Differ.)
National Prospects Value (Attractiveness
Industry Differential)
41
Income/Sales Growth Indicators
  • Export Base Industries Data/Indicator
  • Value-Added Location Quotient
  • Consequential Industries Data/Indicator
  • Payroll Payments 1992-1997
  • Prospective Industries Data/Indicator
  • Sales Growth in Relation to Income Growth
  • Compatible Industries Data/Indicator
  • St. Output St. Demand from input output
    analysis
  • Beneficial Impact Data/Indicator
  • Income Multiplier from econometric models

42
The Market Share Ratios
  • National Sales Prospects, the national growth
    rate of sales of an industry divided by the
    national growth rate in income.
  • State Sales Endowment, the State output for an
    industry divided by the State demand for the
    industry product

in part from input output analysis
43
Income/Sales Growth Suggested Data
44
Income/Sale Categories Analysis
Area Compatibility Value (Ill. Output/Ill.
Demand)
(New Markets)
National Prospects Value (Nat. Sales Growth
/Nat Income Growth )
45
Investment Growth Indicators
  • Export Base Industries Data/Indicator
  • Investment Location Quotient
  • Consequential Industries Data/Indicator
  • Investment Amount (or Investment Index) 1992-1997
  • Prospective Industries Data/Indicator
  • Industry Investment Differential
  • Compatible Industries Data/Indicator
  • Output Growth Rate Employment Growth Rate 92-97
  • Beneficial Impact Data/Indicator
  • Investment Multiplier from econometric models

46
Relative Investment - Proxies
  • Investment Differential, the difference between
    the national growth rate of investment in
    industry i and the overall national growth rate
    in investment.
  • Output - Employment, the State output growth rate
    for an industry minus the state employment growth
    rate for the industry

47
Investment Growth Suggested Data
48
Investment Categories Analysis
Area Compatibility Value (Output Grwth Emp.
Grwth
National Prospects Value (Investment Differential)
49
Practical Applications
Basic Target Industry Identification

50
1 Historical High-Growth, High-Wage Industry
51
2 Forecast High-Growth, High-Wage Industry
52
3 Historical Output and Income Drivers.
53
The Limits and Caveats
  • Contingent Response The community leaders make
    the final determinations
  • Context The Communitys goals (which the data
    should reflect) determines the target industries
  • Preferences We assume measured behaviors like
    employment payroll community preferences
  • Reliability Only as good as the data used and
    the data does mask underlying dynamics

54
Benefits
  • Measures the kinds of performance characteristics
    of importance to developers
  • Income Employment and Gross Product
  • Demonstrates economic dynamics
  • Advantage Location Causation Structural
    Adjustment
  • Relates info on our day to day customers
  • Trade Promotion Investment Locations,
  • Productivity/Modernization Entrepreneurial
    Adjustment

55
Summary
  • Analyzed targeting techniques possible sources
    of data and the methods and procedures to be
    used
  • Selected the growth dimensions for study, in this
    case output, employment and investment because of
    their relation to development goals
  • Identified data sources and methods to measure
    historical and accurately project growth for
    industry segments along those dimensions
  • Developed tables and graphs of the data
  • Drew conclusions about the industries according
    to performance classes we chose.

56
Conclusion
  • Questions
  • Comments
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