After the critical issues have been identified, additional analyses are needed. Like the environmental scan, the internal and external analyses are an assessment of the community’s situation. However, these analyses are more focused and detailed than the scan and relate directly to the critical issues. These are also known as SWOT analyses because the internal analysis addresses “Strengths and Weaknesses” (SW), and the external analysis deals with “Opportunities and Threats” (OT).
External Analysis (Opportunities and Threats)
Communities are increasingly subject to external economic forces at the regional, national, and international levels. It is important to understand the threats and opportunities posed by the external environment that are relevant to the critical issues. Many external influences will be beyond local control. Nevertheless, their influence on the local economy is an important consideration in strategic planning. Examples of factors that might be considered include the following:
Regulatory and legislative changes. The community has little or no control over changes in state regulations and laws. Often these changes affect not only the way municipal government operates but also affect the entire local environment.
Economic changes. Although the community profile provides basic information about the economy, the Commission must know more about the economic forces operating at the international, national and regional level. For example, the feasibility of investing in housing, infrastructure, and industrial parks will be affected by the availability and cost of capital. The globalization of the economy has affected the location and nature of job-creating investments and the skills required of the labor force.
Social and political changes. These include such items as political changes at the national level, such as regional self-government, mandated budgetary and borrowing limitations, reduced sharing of revenues and changes in national housing policies; and social/cultural changes, including greater longevity, changes in average family size, and increased emphasis on environmental protection.
Technological changes. These are among the most frequently discussed changes that affect the critical issues. Employment is directly affected through automation in some industries, which reduces the need for unskilled and semi-skilled labor. At the same time, other industries have difficulty finding adequately trained skilled or semi-skilled workers. Technology can affect every conceivable issue. Consider the impact of robotics, cellular technology, the Internet and information superhighway, and overnight courier service on how business is conducted.
Demographic changes. These, too, are widely discussed matters, such as smaller households, multi-earner families, and variations in birth rates, which affect school construction needs. The aging of the population results in increasing demands for medical and health care.
In analyzing the external environment, it is useful to distinguish between issues that are primarily local and those with a national or global scale. For example, issues such as high interest rates or difficulty in borrowing for business expansion are national issues, which are proper subjects for the external analysis. Other influences may be highly selective, such as technological changes in specific manufacturing industries.
Another important aspect of the external analysis is the extent to which circumstances and trends are important for the community and what they imply for local action. At this stage, it is necessary to define the steps to be taken to use circumstances effectively or minimize their negative influence.
To analyze an external event, the following questions should be answered:
- How is it relevant to the region?
- How does it affect the community?
- Is it impossible to influence the event?
- How community can take advantage or avoid the impact of event?
Sometimes one external event can be both a threat and an opportunity, as demonstrated by the following examples:
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National currency devaluation. It is perceived as an opportunity by export-oriented companies whose products will become more competitive on foreign markets; on the other hand, importing companies will face higher purchasing costs and feel threatened. Here, the city cannot influence the impact.
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New supermarket construction. It is an opportunity for lower prices, more convenient shopping, and new jobs and investment. On the other side, small retail shop owners will be threatened. In this case, however, the city has tools to influence the impact of the presence of a large retail chain through site policy, construction permits, etc.
Internal Analysis (Strengths and Weaknesses)
The internal assessment occupies a pivotal role in strategic planning, because the action plans will either build upon the strengths or correct the weaknesses of the city’s economic situation.
The internal analysis has two purposes:
- To determine local options and capacities for responding to external events.
- To identify internal strengths and weaknesses that can be addressed by strategic measures.
Strengths and weaknesses merit special attention, because they are the basis for determining the city's position compared to other cities with which it competes for jobs and investments.
The environmental scan will have provided some insights into the economic structure and strengths and weaknesses of the regional and local economies. However, in this sharply focused analysis, the strengths and weaknesses will be examined in relation to the critical issues. The following topics and questions are discussed at a typical internal analysis session.
Labor Force Quality. Does the city have enough demand for workers with technical and professional training, or are job opportunities limited to unskilled workers?
Sites and buildings. Does the city have sites and buildings available for business development? Are these sites equipped with appropriate infrastructure? Are there industrial zones in the city?
Transportation. Is the city located on a main highway and/or railroad? Is there an airport near the city? Is parking adequate? Does heavy traffic go through the city or is there a ring road?
Infrastructure. What is the status and capacity of water and sewerage treatment in the city? Has the gasification process been completed? Is the capacity of local power plants sufficient to accommodate development needs for large companies?
Business assistance. Do the city’s regulations and notices correspond with the growth needs of the business sector? Does the city have a business financial assistance program? Are business people represented in the executive bodies of the city?
Quality of life. Is it possible to build or buy an apartment in the city? What is the status of housing units in the city? Are there enough leisure-time and cultural events? Is the city safe?
