Subject Module - Elective CIAKL II - Class 06

EUROPEAN COURSE IN ENTREPRENEURSHIP FOR THE CREATIVE INDUSTRIES

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Analysing the opportunity Sources:

Howard H. Stevenson and David E. Gumpert, “The Heart of Entrepreneurship”, HBR 1985

FrancoisColbert,“EntrepreneurshipandLeadershipinMarketingandArts”,InternationalJournalofArtsManagement,Vol6,Number1,2003

Michael Porter, “Competitive Strategy ‐‐ Techniques for AnalysingIndustriesandCompetitors”,TheFreePress,1980

Opportunistic, creative and innovative The first step is to identify the opportunity, which entails an external (or market) orientation rather than an internal (or resource) orientation. The promoter type is constantly attuned to environmental changes that may suggest a favorable chance, while the trustee type wants to preserve resources and reacts defensively to possible threats to deplete them. Entrepreneurs are not just opportunistic; they are also creative and innovative. The entrepreneur does not necessarily want to break new ground but perhaps just to remix old ideas to make a seemingly new application. Many of today’s fledgling microcomputer and software companies, for example, are merely altering existing technology slightly or repackaging it to accommodate newly perceived market segments. External pressures For the entrepreneurial mentality external pressures stimulate opportunity recognition. These pressures include rapid changes in:

Technology, which opens new doors and closes others. The minicomputer posed problems for those producers that failed to perceive the change quickly.

Consumer economics, which alters both the ability and willingness to pay for new products and services. The sharp rise in energy costs during the mid‐1970s made popular the wood burning stove and chain saw, and spawned the solar energy industry, among others. But these same pressures set back those huge sectors of our industrial economy that thrived on the belief in cheap energy forever.

Social values, which define new styles and standards of living. The 1980s interest in physical fitness opened up markets for special clothing, “natural” food, workout centers, and other businesses.

Political action and regulatory standards, which affect competition. Deregulation of airlines and telecommunications has sparked opportunities for assorted new products and services while at the same time disrupting the economics of truckers, airlines, and many concerns in other sectors.

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Economic factors To determinate how economic is growing, considering the inflation rate, the exchange and interest rates and other economic factors that have major impacts on how businesses operate and make decisions. Since all business need capital to work, all costs of capital will determinate how business could grow or expand, and all economic factors work together as force that affecting business trade and the prices to the final costumers, because the exchange rates affect the costs of exporting goods and the supply and price of imported goods.

Social factors To identify social trends, culture environments that affect the demand, including the wellness and health consciousness, age distribution, population growth, active people rate, employment and careers, the consciousness and the commitment of people to the state and the government. It is also important know the social structure, the different life styles, and the trends of consumption.

Technological factors They have large impact in the macro tendencies, with a great impact in the trends of consumption, but also in the production efficiency, in the development of new products that could emerge new companies with new products that becomes from R&D activity. It is also important identify the rate of the importance the technological evolution in the markets and in the business sector of our interest, since technological shifts can affect costs, quality, new trends and lead to innovation. Furthermore, it is also important determinate what is the state of art of the technology in the business sector, and how important is to follow the tendency, and if it is really determinant for the success for the company and to the costumers.

Environmental factors Great importance in the markets in nowadays, because people and consumers developed a global concern about the environment, and that conscientious determinate how they make their consumption. The concerns about the ecological and environmental aspects such as the climate change, the weather, climate, and, which may especially affect industries such as farming, insurance, tourism, water and waste management, and all industries that may be affected or may affect the environment, with pollutions activities, with a large impact on the awareness of the potential impacts of climate change is affecting how companies operate, which products they offer, and considering the governmental policies, how it determinate the creating of new markets and diminishing or destroying existing ones.

Legal factors How the markets operate, and have a large impact in many companies. In many businesses it is necessary licenses to operate, and in some markets the commercial activity is highly regulated by laws. Therefore, in these

cases it influences its production costs, the way how the companies can offer the products to the market, and the demand for its products.

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Strategy and implementation Sources:

Robert M. Grant, “Contemporary Strategy Analysis” Fifht Edition, Blackwell Publishing, 2005

Michael Porter, “Competitive Strategy ‐‐ Techniques for Analysing Industries and Competitors”, The Free Press, 1980

Francois Colbert, “Entrepreneurship and Leadership in Marketing and Arts”, International Journal of Arts Management, Vol6, Number 1, 2003

Philip Kotler and Kevin Keller, “Marketing Management”, 12th edition, Prentice Hall, 2006

Regis McKenna, “Marketing Is Everything”, Harvard Business Review, 1991

Kevin Roberts, “Lovemarks, The Future Beyond Brands”, Powerhouse Books, 205

Tools for strategic planning Business strategy is a long term plan designed to achieve a particular goal or a set of goals. The entrepreneur should gather as much information as possible about external conditions and opportunities, as well as internal attributes, so that his decisions are valuable, feasible and maximise value. Porter’s five forces model determines attractiveness of market segments the company is interested in, and helps determining what should be its competitive advantages to reach the objectives. The Ansoff matrix is a valuable tool that helps decision making for growth strategy. Implementing strategy means firstly defining the marketing mix also known as the 4P’s ‐ which products, where they should be placed, at what price and how they should be promoted. Secondly, to develop or to create the most efficiently organized internal processes, attributes and resources required to achieve the purposed objectives. This includes investment decisions, namely the acquisition of fixed assets, as shown in the next chapter.

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Threat of new entrants: The most attractive segment is one in which entry barriers are high and exit barriers are low. There will be few new entrants and many leaving the segment. The worst case scenario is when entry barriers are low and exit barriers are high since firms enter with a good economy and face high costs if they want to leave during a bad economy.

Threat of substitute products: A segment is unattractive when there are actual or potential substitutes for the product. Price competition is high and profits are low.

Threat of buyers’ power: When the buyers have many alternatives and switching costs are low, their bargaining power rises and the segment is unattractive.

Threat of suppliers’ power: Reduction of market attractiveness is also caused by powerful, concentrated and organized suppliers which can easily raise prices or reduce quantity supplied, or when the suppliers’ input is important and switching costs are high.

However, when we are analysing the creative industries market, it’s important to consider other forces in the market, since this is a market with some specificities, and is depending of many interlocutors and stakeholders. Like Michael Porter has identified 5 big forces in the market, for general markets, the same process inspired a new perspective and market analysis. Considering multiple intervenients in creative industries projects, it seems very important to include others groups of stakeholders as forces into the market, once that can be determinate to the project success. They usually are a concern to project promoters and they are referenced as strategic elements, and that’s why it’s possible and important to define a strategy of how to involve all of them in the development and implementation of the project. Beyond suppliers and buyers power, threats of substitute products and threats of new entrants, we have also for the creative industries, as stakeholders: the investors, the state, sponsors and the place agents, all of them as forces in the market. Investors – usually, the initial investment in creative industries projects is quite large which leads to seeking intensive capital, where investors will be an answer and an alternative to finance the projects, instead of using banks. At the same time, they also have great power and the possibility to make pressure. State ‐ can be seen as a partner, as an investor, as a promoter or even a direct customer to certain cultural and economic activities, which may involve the creative industries. Through its ministries and its social responsibility network, can also be seen as a network of contacts and as a distribution channel for products and services. That is why we may consider the State as a force in the market, because through specific policies, it can finance or subsidize some areas and sectors of the economy that could make a greater or lesser impact in production and create opportunities to the creative industries.

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Product development: Using an existing gap in the market to develop and offer a new product in an existing market. Customer oriented companies usually take customers suggestions and develop products to satisfy their needs.

Product/Market diversification: New product in a new market, as in, for example, entering a new segment with a new product. It could be the case of vertical integration where the corporation buys a suppliers’ company hence entering in a new market.