Data-driven decision-making isn’t just a passing trend you can overlook. It’s a critical business process you’ll need to commit to before making any strategic move.
Actively or passively, your business already relies on data every day. Product data informs you about the success of your new product launches – customer data guides your marketing campaigns, and employee data leads to positive changes in the workplace. However, if you want to drive business growth, you’ll need to look into industry data, and the best way to do it is with the help of a location quotient calculator.
A location quotient is a valuable tool for measuring an industry’s competitiveness and identifying new business opportunities. Learn how you can use it to your advantage.
Location Quotient in a Nutshell
To use it to your advantage, you first need to know what it is. Often referred to as LQ, the location quotient is a simple equation that helps you determine how concentrated a specific industry is within a region compared to your chosen benchmark region. Most commonly, you’d be comparing the dominance of an industry within a city or state to the national average.
However, it’s not always necessary to compare the concentration to a larger benchmark (in a city vs the whole country). You can use any reference point that suits your unique needs. As long as you follow the formula, you’ll receive insightful data:
Location quotient = Regional asset concentration ÷ Benchmark asset concentration
Needless to say, the location quotient calculator isn’t useful solely for determining the concentration of industry. You can use the same formula to calculate regional employment rates, determine the local specialization, and more.
Types of Data You Need For Calculating The Location Quotient
To perform accurate LQ calculations, you’ll first need to gather all the relevant regional and national metrics, job market data, and specific firmographic data. You’ll need insights into the state of the regional and national economies, their employment rates, and even import and export rates across different industries.
Many import industries in a region, for instance, signify that the supply of products or services doesn’t meet the local needs, so they’d be considered low LQ. On the other hand, many export industries signify a surcharge in supply – hence, they’re considered competitive, high LQ industries.
Only once you’ve ensured that you’ve collected accurate data should you start using your location quotient calculator.
Collecting Data For Your LQ Formula
Collecting relevant LQ data can be an arduous process that should never be done manually. Manual data collection methods are time-consuming, expensive, and have higher risks of human error that could compromise data quality and accuracy.
Fortunately, you can automate the process using web scraping technology. There are plenty of valuable online sources (such as the US Bureau of Labor Statistics) where you can gather an abundance of valuable information within moments using an automated scraper. However, remember that your access to such content could be restricted.
If you want to maximize your efficiency, it’s best to use alternative data sources. You’ll gain access to real-time data and won’t have to search for ways to bypass any restrictions.
How to Benefit from LQ
The local quotient provides distinctive insights that might assist you in putting your company on a successful course. Check out just a few of its many benefits.
Performing competitor analysis
The LQ may assist you in doing competitive research and learning more about the strength of your industry within a certain area if you wish to extend your firm into other regions.
Since high LQ markets are often saturated and very competitive, you’ll need to devise a solid plan of attack to beat out the competition.
Analyzing a Region’s Talent Pools
The LQ may be useful in assisting you in evaluating the talent pools that are accessible and determining if a place has the kind of workers you want. If you’re looking for new employees, seek areas with high LQ since this indicates that plenty of qualified workers in such areas could be a suitable match for your business.
Low LQ might be an indication of a skill shortage.
How to Spot Industry Gaps
You may determine if an area has any industry gaps you might fill using your location quotient calculator. It may assist you in improving your market research and provide insightful information on the current status of your sector and your industry’s specific specialty.
Finding Profitable Investment Possibilities
The LQ is essential to companies, but it may also be useful for investors. The method may be used to discover expanding sectors and the danger of becoming extinct, as well as to identify industries at risk.
Your growth plan may be strengthened by using the location quotient, a potent instrument. You’ll need to use the most accurate data collecting techniques possible to get the most out of it.