Strong and weak drivers

Calculating strengths and weaknesses, opportunities and threats (SWOT) or revealed comparative NIC advantage (RCNA) is in fact not so easy. Just looking for , say, 5 highest indexes or best performing indexes is a short cut.

We need to benchmark the drivers and put them in a context.

In calculating the SW drivers (indicators) we do this by first calculating internal strenghts and weaknesses, then global strenght and weakness of driver and finaly strenght and weakness of drivers in active and country specific trade when compared to NIC trade value of driver.

1. Internal strenght / weakness is calculated by comparing indicator value to average value within group. E.g. indicators within human capital is compared to average of all human capital indicators. Formally: g = indicator - groupAVG. Motivation: Internal weaknesses and strenghts need to acknowledge intrinsic differences between different NIC capital groups, i.e. human, market, process and renewal capital.
2. Global strenght / weakness is calculated simply by comparing each indicator to world average for that indicator. Formally: w= indicator - worldAVG. Motivation: Internal weakness / strenght does not automatically imply that this is true when compared to world averages.
3. Strenght / weakness of driver in trade is calculated by comparing to NIC value of trade for indicator. NIC indicator trade value on the other hand is calculated as a weighted average of shares in trade * indicator values for trade partners. Formally: t = indicator -tradeNIC. Motivation: Strenghts and weaknesses need to be measured in the economic realm of production and trade as country specific.

Having calculated g, w and t we calculate a strenght index NIC-sw for each driver (indicator) as:

NIC-sw = (g + w*2 + t*3)/6

High NIC-sw values indicate strenghts wheras low values indicate weaknesses. And we do this on three levels of NIC: 1) Index value, 2) Impact in GDP formation and growth and 3) cost Efficiency of NIC driver. It is up to user / customer to decide which dimension is in focus, more important: index as measure for potential (future), impact as out put value now or effficiency as part of national overall productivity. A motivated bias woud be:

NIC-SW = (index + efficiency*2 + impact*3)/6

but a simple average

NIC-SW = average(index, impact, efficiency)

balances national economic values of NIC alike.

To pin point opportunities and threats linked to drivers we need to look more closely on recent trends of driver and weight these with respect to impact, efficiency and level.