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Competitive Advantage Analysis for the North Central Enterprise Region

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					Competitive Advantage Analysis
for the
North Central Enterprise Region


prepared for
Enterprise Saskatchewan
D     b
December, 2009
by
Sask Trends Monitor
Background

       Sask Trends Monitor is preparing statistical profiles for the thirteen southern enterprise regions
       in the province. The main elements of the profiles are:
         – demographic data (population, age, ethnicity, Aboriginal identity, immigration, family
            structures etc) from the census and other sources;
            structures,
         – socioeconomic data (education, employment, income, housing, etc.) about the residents
            from the census and other sources;
         – a competitive advantage analysis; and
                                                                   economy             counts
         – other available economic data (contribution to the economy, business counts, major
            capital projects, e.g.).

       This material is a short version of the Competitive Advantage Analysis (CAA) that will be
                          reports
       included in those reports.

       It is provided in advance for the Enterprise Region until the full profiles are ready.

       The methodology used in a competitive advantage analysis (CAA) was developed by economist
       Dr. Emanuel Carvalho from the University of Waterloo. It is based on work he did for the
       Ontario Ministry of Municipal Affairs.




December 2009                                            2
Competitive Advantage Analysis: What it is

       The CAA is a particular kind of statistical analysis that looks at economic trends in a
       region or community by sector (industry group).

       The CAA is not a forecast of future opportunities. It is, instead, an examination of
       past trends with a view to identifying industry sectors that have under-performed or
       over-performed relative to other industries and other regions. While this may help
       inform future growth, it is not a blueprint for it.

       The CAA is only one of the tools that can be used to identify the economic
       strengths and weaknesses in a geographic region.

       The CAA compares a region’s economic performance by industry group over a
       period of time compared with those same industries in another economy over the
       same period. So there are five choices to make before embarking on the
       analysis.




December 2009                                     3
The Five Choices

       Choosing the Regions: Because the enterprise regions have custom boundaries, the only
       source of economic data that can be used for the CAA is the census.

       Choosing the Economic Measure: Employment was used as the economic measure because
       it is the only economic measure available from the census. This has both advantages and
       disadvantages.
                Employment has the advantage of being easy to understand – a job is a readily
                identifiable measure of economic success for an individual if not an economy.
                R l ti l detailed data from Statistics Canada’s decennial census provides employment
                Relatively d t il d d t f    St ti ti C      d ’ d      i l            id     l     t
                by industry group at the sub-provincial level.
                Changes in productivity can affect changes in employment; a firm or industry may be
                more successful by every other measure except employment.
                Changes in hours of work, multiple job holdings, and commuting can cause problems in
                     g                    ,     p j            g ,              g          p
                the employment data.

       Choosing the Time Frame: A short (2001 to 2006) period was chosen over longer options
       because the industry group definitions used by Stats Canada changed between 1996 and 2001.

       Choosing the Comparison Economy: The provincial economy was used as the reference
       point.

       Choosing the Industry Groups: The most detailed possible industry breakdown available
       translates into sixteen industry groupings.


December 2009                                        4
Choosing the Time Frame

                 Employment in Saskatchewan (off Reserve only)                    By using the 2001 and 2006
                                                                                  census, we are effectively
                                                                                  measuring what happened to
   520                                                                            employment in the province
           thousands
                                                                                              period.
                                                                                  during that period
   510

                                                                                  This was the period in which the
   500
                                                                                  provincial economy was
                                                                                  prospering but not booming.
   490
                                                                                    – This is after Y2K and the
                                                                                       “dot.com” bust and before
   480
                                                                                       the commodity price boom.
   470
                                                                                    – Consumer confidence was
                                                                                       high particularly late in the
                                                                                       period.
                                                                                       period
   460
                                                                                    – The population was declining
   450
                                                                                       because of out-migration to
                                                                                       Alberta.
   440                                                                              – The price of crude oil was
                                                                                       rising starting the period at
                                                                                       rising,
                                                     CAA
   430                                          comparison period                      US$26/bbl and ending at
                                                                                       US$66/bbl.
   420                                                                              – Agriculture was in some
                                                                                       difficulty from low crop
   410
                                                                                                    BSE.
                                                                                       prices and BSE
         1992    1994   1996    1998   2000    2002     2004        2006   2008


December 2009                                                  5
Choosing the Industry Groups

                            Experienced Labour Force in 2006, Saskatchewan                         There are 16 industry
                                                                                                   groups used in the
                                                                                                   analysis, the most that
            Arts, entertainment, recreation      9,395                                             can be easily and
                    Information and culture        11,975                                          accurately derived from
                                                                                                   the census.
                           Wholesale trade               19,100

     Mining, oil and gas extraction, utilities               24,095                                The public sector
                                                                                                   (government, health
          Transportation and warehousing
               p                       g                       ,
                                                             24,460
                                                                                                   care, etc )
                                                                                                   care etc.) is included for
     Finance, insurance, real estate, rental                  25,275                               completeness, not
                                                                                                   because there is any
         Personal and household services                      25,700                               expectation that it is a
                                                                                                   development target.
                              Manufacturing                       29,870

                                Construction                      29,940
                                                                                                   The experienced labour
                       Public administration                           33,315                      force is measured for
                                                                                                   the industry of the
                          Business services                            34,110                      person’s main job or, if
                                                                                                   not working, their most
                                                                                                              g,
        Accommodation and f d services
        A      d ti     d food    i                                     34 580
                                                                        34,580
                                                                                                   recent job in the past 18
                         Education services                                    40,315              months.
                                 Retail trade                                           56,730

         Health care and social assistance                                               58,405

   Agriculture, forestry, fishing and hunting                                             60,210



December 2009                                                              6
Components of the Competitive
       g      y
Advantage Analysis

                       p                             pp                y
  There are four components to the CAA that are applied to each industry
  sector. All are interesting and useful in their own right.
      •   Location Quotients – a measure of industry concentration
      •   Shift/Share Analysis – a measure of growth adjusted for “normal” patterns
      •   Leading/Lagging Analysis – measures relative growth rates
      •   Industry Classification – a summary of the three measures
North Central Enterprise Region




                                         Big River




                                                                                                                          Choiceland



                         Spiritwood



                                                             Shellbrook            Prince Albert




                                                                                            Birch Hills
                                                                                            Bi h Hill
                                                                                                          Kinistino


                                                                                                                      Melfort   Star City
                                               Blaine Lake
                                                                     Duck Lake
         th Battleford
                               Hafford




                                                             Hague
                                                                                 Cudworth
                              Radisson

December 2009                                                                8
Experienced Labour Force, North Central Enterprise Region, 2006

                                Experienced Labour Force, by Industry, 2006,                                             The public sector,
                                      North Central Enterprise Region
                                                                                                                         broadly defined to
         Health care and social assistance                                                                       4,225
                                                                                                                         include health and
                                 Retail trade                                                                    4 205
                                                                                                                 4,205   education as well as
   Agriculture, forestry, fishing and hunting                                                            3,675
                                                                                                                         government proper,
                                                                                                                         dominates employment
                                                                                                                         in the North Central
                       Public administration                                                            3,580

                         Education services                                                     2,869                    Enterprise Region.
        Accommodation and food services                                                 2,314

                                Construction                                            2,274

         Personal and household services                                        1,669

                          Business services                                     ,
                                                                               1,588

                              Manufacturing                               1,452

          Transportation and warehousing                                 1,391

     Finance, insurance, real estate, rental                           1,205

     Mining, oil and gas extraction, utilities                   993

                            Wholesale trade                      958

            Arts, entertainment, recreation                706

                    Information and culture            514

                                                 0   500     1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500




December 2009                                                                                   9
Location Quotients

                           Location Quotients, North Central Enterprise Region                                   The location quotient measures the
                                                                                                                 size of the industry in the region
                                                                                                                 relative to the province as a whole.
                       Public administration                                                                     Industries with a location quotient
                                                                                                                 in excess of 1.25 are classified as
                                Construction                                                                      high ;                  0 75
                                                                                                                 “high”; those less than 0.75 are
                                                                                                                 classified as “low”.
            Arts, entertainment, recreation

                                 Retail trade                                                                    This doesn’t mean the industries
                                                                                                                 are small or large, just that they
           Health care and social services                                                                       are relatively smaller or larger than
                                                                                                                                       whole
                                                                                                                 in the province as a whole.
                         Education services

        Accommodation and food services                                                                          Industries with a ‘high” location
                                                                                                                 quotient tend to export
         Personal and household services                                                                         goods/services from the region.
                                                                                                                 Goods and services probably need
   Agriculture, forestry, fishing and hunting
    g         ,        y,       g           g                                                                    to be imported for those with a
                                                                                                                 “low” location quotient.
          Transportation and warehousing

                            Wholesale trade                                                                      Only one sector – public
                                                                                                                 administration – had a “high”
                              Manufacturing                                                       2001           location quotient in 2006. Three
                                                                                                  2006                   low
                                                                                                                 had a “low” location quotient
     Finance, insurance, real estate, rental
                                                                                                                 including the resource/utility group
                          Business services                                                                      Another nine groups are classified
                                                                                                                 as “medium” and three are near
                    Information and culture                                                                      the border between low and
                                                                                                                 medium.
     Mining, oil and gas extraction, utilities

                                             0.00   0.25     0.50   0.75   1.00     1.25   1.50    1.75   2.00
                                                       low                 medium                 high


December 2009                                                                         10
Shift/Share Analysis, 2001 to 2006

                   Regional Effects, 2001 to 2006, North Central Enterprise Region                    The shift/share analysis breaks
                                                                                                      down employment change into
                                                                                                      three components:
     Mining, oil and gas extraction, utilities                                                            –    the provincial effect;
                                                                                                          –    the industry effect; and
     Finance insurance real estate rental
     Finance, insurance,    estate,
                                                                                                          –    the regional effect.
                         Education services
                                                                                                      The regional effect is the most
                       Public administration
                                                                                                      interesting. It measures what part
                          Business services
                                                                                                      of the employment increase or
                                                                                                      decrease is attributable to factors
          Transportation and warehousing                                                              unique to the region. These are
                                                                                                      changes that cannot be explained
                    Information and culture                                                           by the performance of the sector at
                                                                                                      the provincial level.
         Personal and household services

                                 Retail trade                                                         The North Central ER has a large
                                                                                                      positive regional effect in the
   Agriculture, forestry, fishing and hunting                                                         resource/utility group. The region
                                                                                                      was doing particularly well in this
                                Construction                                                          sector relative to the province as a
                                                                                                      whole.
                            Wholesale trade

        Accommodation and food services                                                               There is a large negative regional
                                                                                                      effect in three industry groups,
           Health care and social services
                                                                                                      health care, manufacturing, and the
                                                                                                      arts/entertainment/recreation
                              Manufacturing
                                                                                                      group.
            Arts, entertainment, recreation

                                             -400   -300   -200   -100   0   100    200   300   400




December 2009                                                                  11
Leading/Lagging Analysis, 2001 to 2006

       The leading/lagging analysis compares, for each industry group:
        – employment growth in the region relative to growth provincially in the same group; and
        – employment growth provincially relative to total employment growth.

       The graph on the next page maps the industry groups doing poorly and well on the horizontal axis with
       their regional performance on the vertical axis.

                                                                                              provincially
       Industry groups in the upper right quadrant are leading growth both in the region and provincially.
       They are classified as “drivers”; examples for the North Central ER include the mining/oil and gas
       sector and business services.

       Those in the lower left are lagging in both cases and are classified as vulnerable or challenging. The
       arts/entertainment group and manufacturing are in this quadrant.

       Those in the upper left quadrant are typically in a state of evolution and the finance/insurance industry
       group is the only one in the North Central region that is clearly in this quadrant.

       Those in the lower right are classified as either modest, yielding, or promising, depending on their size.
       The health care and social service group, for example, is classified as “yielding” because it is large.

           y       y groups
       Many industry g p in the North Central ER are near the border so no real definitive statements can
       be made about them.


December 2009                                              12
Leading/Lagging Analysis, 2001 to 2006, North Central ER

             60%
  leading

                                                                                                                                           mining/oil
             50%                                                                                                                         & gas/utilities


             40%


             30%
   regional
   sector 20%                                                                                        information
   relative                                                                                           & culture
                                                                                            public                  educational
   growth
                                             finance, insurance, real estate             administration              services
             10%
                                                            transportation
                                                                                                                            business services
                                                            & warehousing
              0%           agriculture
                                                   accommodation & food
                                                                                                                    construction

             -10%                                 wholesale                                    retail trade      personal &
                                                    trade          manufacturing                              household services
                                                                   & processing         health care
             -20%                                                                    & social services



             -30%                           arts, entertainment, recreation
   lagging

             -40%
                  25%
                 -25%    20%
                        -20%          15%
                                     -15%            10%
                                                    -10%             -5%
                                                                      5%            0%             5%              10%             15%            20%      25%
                           lagging                                provincial sector relative growth                                leading


December 2009                                                                  13
Industry Classification Scheme

       The Competitive Advantage Analysis is future oriented in the sense that it classifies the industries in
       the region into categories using forward-looking terminology. Some terms used, for example, are:
         – Emerging strength
         – High priority retention target
         – Prospects limited by external trends

       Besides the data quality issues and the fact that we are using relatively old employment data as a
       measure of economic success, there are some problems with the classification scheme.
        – The methodology implicitly assumes that employment growth at the provincial level is a measure
            of success. If the industry group is not growing provincially but is doing so in the region, for
            example, then it is assumed that the sector has limited prospects.
        – There is a bias toward large sectors; relatively small industry groups can be classified as an
            emerging st ength but        are               ha ing “ eak base”
            eme ging strength b t most a e dismissed as having a “weak base”. The concept of a “niche
            market” doesn’t enter into the equations.

       In spite of the limitations, the classification does seem to generate the needed debate about which
                             p p                                     y ,             ,            p
       sectors have limited prospects and which do not. The analysis, to be useful, has to be tempered with
       a realistic assessment by the region’s economic players.

       The graph on the following page shows the classifications for the North Central Enterprise Region.
       Industry groups that are on the borders of the four quadrants will be classified as between the two
       choices.
       choices



December 2009                                              14
Industry Classification: North Central Enterprise Region
     regional sector relative growth
       80%
                                                                                                                                           current and emerging strengths
                prospects limited
                                           Note: The three sectors
                                           dominated by the public
                                        sector (public administration,
       60%                                    care
                                       health care, education services)
                                        are excluded from this graph.                                                                                    Mining/
                                                                                                                                                        Oil & Gas/
                                                                                                                                                         Utilities
       40%
                                                       Finance, insurance,          Transportation
                                                           real estate                           Retail
                                                                                                 t d
                                                                                                 trade

       20%


                                                                                                                           Business
                                                                                                     Personal &            services
        0%       Agriculture                                                                         household
                                                                       cco    oda o
                                                                      Accommodation
                  Forestry
                  F     t                                                                             services
                                                                          & food
                                              Wholesale
                                               trade                                                                        Information & culture

      -20%
                                                                               Arts,                                Construction
                                                                          entertainment,
                                                                            recreation        Manufacturing
      -40%


                                                                                                                                                        Retention targets
                prospects limited                                                                                                                          (unless small)
      -60%
          -20%             -15%             -10%             -5%                 0%              5%               10%          15%              20%        25%          30%
                                                                          provincial growth


15                                                                                         December 2009
Industry Classification, North Central ER, 2001 to 2006

 Industry                                     Carvalho Classification
 Agriculture, forestry, fishing and hunting   Prospects limited by external trends and declining competitiveness
 Mining, oil and gas extraction, utilities    Emerging strength
 Construction                                 High priority retention target
 Manufacturing                                Prospects limited by weak base and declining competitiveness
 Wholesale trade                              Prospects limited by external trends and declining competitiveness
 Retail trade                                 High priority retention target
 T         t ti     d       h
 Transportation and warehousing  i            C      t t
                                              Current strengthth
 Information and culture                      Emerging strength
 Finance, insurance, real estate, rental      Prospects limited by external trends and small base
 Education services                           Current strength
 Health care and social services              High priority retention target
 Business services                            Emerging strength
 Accommodation and food services              Prospects limited by external trends and declining competitiveness
 Arts, entertainment, recreation              Prospects limited by external trends and declining competitiveness
 Personal and household services                g priority retention target
                                              High p      y              g
 Public administration                        Current strength




December 2009                                                16

				
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