Business strategy and

innovation in cultural
industries
Ekaterina Baskakova

September 25, 2023

Why do we analyze industry?

• To make sense of what we’re doing

• To improve what we’re doing, finding the “best” move
(the most efficient, most effective, most consistent)
• To forecast industry profitability, to make investment
decisions
• To alter industry structure: identify and control
“bottlenecks” within industries

2
From industry attractiveness to
competitive advantage
• What is a secret of success in this industry?

• To survive and prosper, Firm must supply what customers

want to buy and survive the competition

 What do our costumers want?:

 What does the firm need to do to survive the competition?

3
4
Key success factors

5
Competitor analysis

• Porter’s model is useful, but provides us with a static

picture
• Beyond industry structure we need a more fine-grained
competitor analysis
• Why? The dominant feature of a firm’s competitive
environment is the behaviour of its closest rivals

• Competitor analysis to:

• Forecast competitors’ future strategies and decisions
• Predict competitors’ likely reactions to ours
• Determine how we can influence competitors’ behaviour to make it
more favorable
6
Competitor analysis

7
 Date Topic Readings

Course presentation
1 18/09 & Grant, chapter 1
Introduction to Business Strategy

2 22/09 Industry analysis Grant, chapter 3

3 25/09 Analysis of the firm Grant, chapter 5

4 29/09 Case study presentations
5 02/10 Firms in arts and culture Dubini, chapter 3
Organizational design and people
management
6 06/10 Dubini chapter 7
&
Case study presentations
7 09/10 Competitive advantage Grant, chapter 7
Benefits, needs and offer system
8 13/10 & Dubini, chapter 4
Business models in cultural industries

Industry evolution and strategic change

9 16/10 & Grant, chapter 8 and 9
Management of Innovation

10 20/10 Final presentations 8

 Class 3
Analysis of the Firm
What is strategy?

FIRM
INDUSTRY
• Goals and
values • customers
• Resources STRATEG • competitors
and Y • suppliers
competencies
• Organizational
structures

10
What is strategy?

FIRM
INDUSTRY
• Goals and
values • customers
• Resources STRATEG • competitors
and Y • suppliers
competencies
• Organizational
structures

11
Focus on Resources and capabilities

• Industry environment more unstable

• Competitive advantage rather then industry attractiveness is a

primary source of superior profitability.

• Сustomers’ preferences are volatile

• Identity of customers and the technologies serving them are

changing

• Internationalization leads to more competitive pressure and few

industries offer a secure refuge
Example: Kodak

• 1892
• XX century – leading manufacturer of photografic film
• 1968: 80% of global photography market share
• Business strategy: razor and blades model
• Arrival of digital cameras…

Focus on enternal Focus on internal R&C

environment
Resource-based view

• Before → strategy as industry selection and positioning

→ emphasis on doing the same (but better) that others do

• Now → resource-based view

→ emphasis on exlopiting differences

• Resources = productive assets owned by firms

• Capabilities = what the firm can do

 INDUSTRY KEY
COMPETITIVE
STRATEGY SUCCESS
ADVANTAGE
FACTORS

ORGANIZATIONAL
CAPABILITIES

RESOURCES

TANGIBLE INTANGIBLE HUMAN

RESOURCES RESOURCES RESOURCES
Tangible resources

 Financial resources (e.g., cash, securities, borrowing

capacity)
 Physical resources (e.g., plant, equipment, land, mineral
reserves)

Example: Disney
Annual accounts for 2014

- entire movie library: $ 1.4 billion

- total land assets: $ 1.2 billion
Tangible resources

? What opportunities exist for economizing on use of resources?

? Can we use fewer resources to support the same level of business? Or
use the same resources to enlarge the business?
? Can existing assets be deployed more profitably?

Example: Disney in 1980s

- Net income in 1984: $ 98 million, in 1988: $ 570 million
- 1984 acquisition of Arvida
- landings → hotels, facilities, residential housing, theme park
- film library → started to sell Disney classics on VHS and to license
movies to TV networks
- movie production was doubled
- chain of Disney stores, Disney theme parks in Europe and Asia
Intangible resources
Intangible resources

• Trademarks
• Patents and copyrights (e.g., Goretex)
• Tradesecrets (e.g., Coca Cola formula)
• Brands
• Reputation
• Firm’s relationships/network resources
• Culture
Nike gives head office staff a week off
for mental health break
Intangible resource: brand
Intangible resource: brand
Human resources

• Skills/know-how

• Capacity for communication and collaboration

• Motivation
Organizational capabilities

Organizational capability = a firm’s capacity to deploy resources for

a desired end result.

Capabilities = competencies

• Distinctive competence: those things that an organization does

particularly well relative to its competitors

• Core competence: those capabilities fundamental to a firm’s

strategy and performance

Functional analysis of capabilities vs Value chain

Value chain analysis
Identify capabilities in each function
Organizational capabilities

• Coordinated behavior

• Organizational routines → regular and predictable

behavioral patterns

• Integration: combitation of different capabilities

• Dynamic capabilities = processes that are designed to

continuously expand existing resources or to improve or
modify operating capabilities.
 Relevance
Establishing
a competitive Scarcity
advantage
Durability
Profit-
earning Sustaining
a competitive Transferability
potential of
advantage
resource or Replicability
capability
Property rights
Appropriating Relative
a competitive bargaining
advantage power
Relevance
The VRIO framework

• In order to evaluate whether your resources can be

considered as a source of sustained competitive advantage
you may ask yourself four questions:

1) Is the resource Valuable? (relevance)

2) Is the resource Rare? (scarcity)
3) Is the resource difficult to Imitate? (transferability/replicability)
4) Is the company Organized to exploit the resource? (appropriability)
How do we appraise resources and
capabilities?

+
Superfluous
Relative strength

Key strengths
strengths
CREATIVITY EXPLOIT

Zone of
Key weaknesses
irrelevance
- OUTSOURCE

- Strategic importance +