1. Marketing Alberta Communities Regional Economic Development Workshops March 14 to 18, 2005 Module 3 – Targeting for Economic Development Presented by:

2. Targeting Your Economic Development Program Without “targets” your economic development program is “aimless” and ultimately ineffective. –The choice of target sectors should be based on your community’s inherent “competitive advantages”. Economic Base Analysis –Which sectors are strong and growing in your community or region – which are under-represented - why???

3. Economic Base Analysis What is it? –A set of analytical tools to profile the local economy. Location Quotient Analysis - measures the concentration of each industry in the local economy. Shift/Share Analysis - measures the relative growth or decline of each industry during the study period - compared to a reference area (usually the province).

4. Employment by Industry Data Sources Two sources of data for the analysis: 2001 Census – used for Location Quotient Analysis –Statistics Canada used S.I.C. (Standard Industrial Classification) to record industry data. In 2001 they switched to NAICS (North American Industrial Classification System). As a result we can’t use Census data to measure changes. However it is the most accurate profile of the local economy. Labour Force Survey – used for Shift/Share Analysis –The Labour Force Survey (also by Statistics Canada) provides consistent and comparable data (using NAICS) back to 1990, allowing us to measure changes in the economy. Unfortunately it is available only down to the “Economic Region” or “Census Metropolitan Area”.

5. Location Quotient Analysis Ratio of “Sector Employment” to “Total Employment” in local economy compared to a reference area (province). LQ = 1.00 – same ratio as the reference area. LQ < 1.00 – sector is under-represented in the local economy – implies leakage to another market. LQ > 1.00 – sector is more concentrated than the reference area – bringing new $ to the local economy – implies that the community has a “competitive advantage” for this industry.

6. Location Quotient Analysis Calgary & Edmonton – 2001 Census Calgary’s Strengths Legal and Accounting Services Financial & Information Services 564,000 Total Employment Edmonton’s Strengths Public Administration Health & Education Services 527,000 Total Employment

7. Shift/Share Analysis Measures the Relative Growth of each sector of the economy compared to the reference area. –Reference Area Growth Effect – the net change in employment attributable to overall growth/decline of the economy in the reference area (business cycle) –Industrial Mix Effect – the net change in employment attributable to the overall growth/decline of the industry (growth industries vs. sunset industries). –Differential Shift Effect – the net change in employment attributable to local factors. Is the sector growing more quickly in your community than elsewhere in the province or is it losing share? –This shows real growth vs. apparent growth

8. Sample Shift Share Analysis Kitchener/Waterloo CMA Source: Labour Force Survey 98/02 98 / 02 Net Change Reference Area Industrial MixDifferential INDUSTRY SECTOR – NAICS CODEEmploymentGrowth EffectEffectShift Effect Agriculture, Forestry & Fishing-2,000421-1,537-884 Mining, Oil & Gas Utilities Construction-9001,2631,504-3,667 Manufacturing8,3005,7481,4671,084 Trade5,4003,1488231,430 Transportation & Warehousing3,400758-1162,758 Finance, Insurance & Real Estate-1,2001,674-713-2,161 Professional, Scientific & Technical8001,127704-1,031 Management, Administration & Support Services2,5007167611,023 Education Services4,3001,453-1803,027 Health Care & Social Services2,3001,621-281960 Information, Culture & Recreation1,500674523303 Accommodation & Food Services5001,284-224-560 Other Services (except public administration)-1,9001,116-1,516-1,500 Public Administration-1,900737-549-2,088 Total 20,600

9. Net Change Employment Kitchener/Waterloo CMA Source: Labour Force Survey 1998-2002 20,600 Net New Jobs added in 5 years 40% of which were Manufacturing jobs

10. Shift/Share Analysis Kitchener/Waterloo CMA Source: Labour Force Survey 98/02 Shows Relative Growth/Decline Compared to the Province

11. Comments - Shift/Share Analysis Manufacturing Sector Not only is manufacturing highly concentrated in the Kitchener/Waterloo region, it is growing faster than elsewhere across the province. –8,300 net new jobs added in K/W during the 5-year study period = average growth rate 2.6% per year. Commercial Services Finance, insurance, real estate, professional services (legal, accounting, management consulting) and government offices are all under-represented in Kitchener/Waterloo area and are declining relative to provincial growth rates. –Net loss of 2,400 jobs in the Finance, Insurance, Real Estate, Professional Services and Public Administration during the study period

12. Ranking Economic Performance Two economic models to rank the performance of each sector in the local economy. –Both use the Economic Base Analysis. Carvalho Model – developed by Dr. Emanuel Carvalho, University of Waterloo McLean/Voytek Model – from “Understanding your Economy: Using Analysis to Guide Local Strategic Planning” - Mary McLean & Kenneth Voytek, 1992

13. Carvalho Model Ranking Economic Performance Developed by Dr. Emanuel Carvalho – Univ. of Waterloo –Asst. Director EDAC/U of W Economic Development Program Considers 3 individual measures to rank each sectors : –Concentration Locally Location Quotient –Strength of Overall Industry Industrial Mix Effect –Local Growth Factors Differential Shift Effect High Location Quotient Industrial Mix Effect Differential Shift Effect 12 > 1.25 PositivePositive 11 0.75 – 1.25 PositivePositive 10 < 0.75 PositivePositive Medium 9 > 1.25 NegativePositive 8 0.75 – 1.25 NegativePositive 7 < 0.75 NegativePositive 6 > 1.25 PositiveNegative 5 0.75 – 1.25 PositiveNegative 4 < 0.75 PositiveNegative Low 3 > 1.25 NegativeNegative 2 0.75 – 1.25 NegativeNegative 1 < 0.75 NegativeNegative

14. McLean/Voytek Model

15. What’s Next?? Once you’ve selected your targets? –Get to know as much as you can about: –The industry sector in general Industry leaders Issues of concern Locations of significant clusters –Local firms in this sector Corporate Aftercare –Processes used Traditional and Emerging Technologies –Up & Down Stream Industries Suppliers & Customers

16. Corporate Aftercare Programs Simply visiting your companies is the most powerful of all economic development programs. –It is now generally understood that between 70% to 85% of all new foreign direct investment is actually follow-on investment by multinational companies already established in Canada. –“You can leave your passport at home and still have a strong business attraction program.” –Matthew Fischer, CED, Ec.D.

17. Available for Download These 3 Power Point Presentations IEDC Template in Excel Guide to Researcher on how to complete the IEDC Template MMK Report on IEDC Template Guide for a Corporate Call Performance Measurement Article

18. Maxims of Economic Development

19. Maxims of Economic Development Look Inward for Growth 1. Existing businesses will generate as much as 90% of the growth in your community. Moreover, the vast majority of all new jobs are created by small entrepreneurial firms. 2. 70% to 85% of new Foreign Investment is actually follow-on investment by foreign-owned companies already in Canada. “You can leave your passport at home and still have an effective foreign investment attraction program.”

20. Maxims of Economic Development Importance of Planning 3. Be Strategic - There will always be too many opportunities competing for your time and budget. Prioritize - strategically select a manageable number of projects to focus on and build a broad base of support in the community for their implementation. 4. Without well defined “targets”, your economic development program is “aimless”. Ensure your targeting is based on a solid foundation such as an Economic Base Analysis.

21. Maxims of Economic Development Marketing Techniques 5. If companies can’t “Google” your community you’re not in the game. Over 90% of short lists in site selection are based on internet research - without you even being aware you were considered. Also, because basic information is already available on the web, your first contact with a client becomes much more critical requiring higher level information. 6. Personal contact is still the most effective means of communicating with your client. 6. Personal contact is still the most effective means of communicating with your client. Choose face-to-face contact before any other form of communication (advertising, trade shows, direct mail, etc.)

22. For further information contact us at : 182 Willow Ridge Road, RR #3 Ilderton, ON N0M 2A0 Tel: (519) 666-3668 Fax: (519) 666-3670 Email: mfischer@execulink.com