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
Competitive
Advantage
Elements
Firm Strategy,
Structure, and
Rivalry
Related and
Supporting
Industry
Based on Porter’s Diamond Theory – Porter, M. (1990)
Demand
Conditions
Factor Conditions
Competitive
Advantage
Elements
Firm Strategy,
Related and
Structure, and
Supporting
Rivalry
Industry
Demand Conditions
What conditions
influence demand
for goods or
services produced
in the region?
Demand
Conditions
Factor Conditions
Competitive
Advantage
Elements
Firm Strategy,
Related and
Structure, and
Supporting
Rivalry
Industry
Factor Conditions
• Infrastructure
• Resources & Materials
• Skilled Workforce
Factor Conditions: Workforce
Who are the region’s workers?
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Skilled/unskilled
Labor force participation rate
Unemployment rate
Occupation mix
Experience/age
Identifying Skills in the Region
INSERT YOUR
REGION’S CHART
LIKE THIS
EXAMPLE HERE
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Demand
Conditions
Factor Conditions
Competitive
Advantage
Elements
Firm Strategy,
Related and
Structure, and
Supporting
Rivalry
Industry
Firm Strategy, Rivalry,
Composition
• Region’s portfolio of businesses
• Entrepreneurship activity and support
• Mix of industries
Business and Industry
INSERT YOUR
REGION’S CHART
LIKE THIS
EXAMPLE HERE
Demand
Conditions
Factor Conditions
Competitive
Advantage
Elements
Firm Strategy,
Related and
Structure, and
Supporting
Rivalry
Industry
Related and
Supporting Industry
Do industries buy and sell
from each other regionally?
Do any strong value chains
exist in the region?
Value Chain Example
Winemaking
Equipment
Grape Stock
Fertilizers,
Pesticides,
Herbicides
Grape
Harvesting
Equipment
Irrigation
Technology
State Government
Agencies
Barrels
Bottles
Growers/
Vineyards
Wineries/
Processing
Facilities
Educational, Research
& Trade Organizations
Caps & Corks
Labels
Public
Relations &
Advertising
Specialized
Publications
California
Agricultural Cluster
Food
Cluster
Tourism
Cluster
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 Changes
Moving Up or Down
Change in
Percentage of
Jobs in Industry
over Time
Understanding Changes
Moving Left or Right
Relative Concentration of Industry
in the Region Compared to the Nation
Percent Change in Jobs over Time
Understanding Changes
Growth in % Jobs over Time
Growth in % Jobs over Time
Lower Concentration of Industry
in Region
Higher Concentration of Industry
in Region
Decline in % of Jobs over Time
Decline in % of Jobs over Time
Lower Concentration of Industry
in Region
Higher Concentration of Industry
in Region
Location Quotient: Measure of Concentration of Industry
Regional Clusters: 2002-2007
INSERT YOUR
REGION’S CHART
LIKE THIS
EXAMPLE HERE
Regional Clusters: 2006-2011
INSERT YOUR
REGION’S CHART
LIKE THIS
EXAMPLE HERE
Behind the Bubble Chart
INSERT YOUR
REGION’S CHART
LIKE THIS
EXAMPLE – Move
line to divide 1+ LQ
Location
Quotient more
than 1 =
Concentration
Behind the Bubble Chart
INSERT YOUR
REGION’S CHART
LIKE THIS
EXAMPLE – Adjust
red circles to top 5
Industries
with
Greatest
Percentage
Growth
Examining the Leaky Bucket
The Regional
Economy
$
Goods or Services
Purchased outside
the Region
Looking at Regional
INSERT YOUR
Expenditures
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
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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
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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