Lecture 1. Markets And Value Chains
So, hi! My name is Volodymyr Vorobey. I’m director of the economic development agency PPV Knowledge Networks (it’s a Western-Ukrainian Lviv-based agency) and I’m glad to welcome you to this course about creating value in creative economy.

Cultural organisations and creative enterprises quite often do not think about themselves in market terms. What do I mean by market terms? When someone is asking you: “What markets are you operating on”? Some organisations might think: “Oh, wow, that’s not about mewe are creating some great cultural products; market is not about us”.

In fact, it’s not true. All of cultural organisations and creative enterprises are operating in certain markets. So and what [is a] market? Market is a system where parties are engaged in exchange. So, who are the parties? It’s buyers and sellers. And what is a system? A system is an infrastructure, relations, it’s also systems which are put in place by governments for markets to operate. And who are the buyers and sellers? Well, it’s customers of cultural products, and sellers are the cultural organisations and creative enterprises just, perhaps, as you.

And if you think about creative enterprises, it’s OK to think about market terms. Architectural bureaus are providing services, it’s paid for, and there is a market for services of architectural bureaus, indeed. But then what about theatres? There’s also a market for theatres. Some of them can be private companies, some of them can be governmentally-funded companiesand it’s also the market for performing arts. So, make sure that you are OK to answer the question: “What markets are you operating on?”

There are different ways to look at the markets. So, what types of markets exist out there?

First definition is geographical markets. That’s quite easy, in fact. We’re operating either at the local level, so we are a local theatre company, or we’re operating as the national company because we have such a great impact at the countryat the country leveland we look for audiences nationwide. Or we can, in fact, look at the European levelso we are so big, such a big company. And, for instance, for many creative enterprises, who are even small entities, small and medium enterprises, SMEs or microenterprises (microenterprises are those who have less than ten employees), they can operate at the European market. Don’t be too humble; think about what your geographical market is.

Secondly, and second way of looking at things, it can be product or service market. It’s also called ‘verticals’: what vertical you are in. If we think about the product market, it can be fashion, items, fashion items. If we think about products or services, let’s say, it can be services for PR-agencies dealing with publishing industry. So, specialized vertical the companies are operating in. And companies can also be cultural organisations, cultural operators.

And the third way to look at things, it’s the sector or industry level, or so-called ‘horizontals’, horizontal level. And here we are talking about, indeed, those more familiar to other definitions of market: it’s the literature, it’s the cinema market, it’s fashion, it’s design, it’s performing arts or visual arts. These are the horizontal markets, industries.

So, when you face the question what markets you are operating on, you should not be afraid of this question, and you should be ready with an answer. You should tell, let’s say, that we are operating at the Western Ukrainian festivals market, or we are operating at the European home decoration market, or we are operating at the Ukrainian literature market (if you are a publishing company or Ukrainian books market).

So, do think about which market your organisation operates and then the next question comes: How are the markets organised? And then the interesting question of value chain comes. So, on the markets players are organised along the value chain. What is a value chain? Value chain is, actually, the chain where different organisations add value for a customer to receive final product. So, essentially, at the beginning we have the input. If we are talking about cultural and creative industries, we are talking about creativity, there’s a creative idea you start with. And then you add value and transform this idea into the final product. And that’s our output.

In the creative and cultural area, we would talk about the cultural product. So we start with creativity as input and end up with cultural product as output. That’s something with as customers finally pay tickets for. That’s something that we consume. And do not be afraid about the term ‘consuming cultural products’, ‘consuming culture’. It’s great. In fact, we should consume more of cultural products, and it means there should be more of these various, interesting, multiple cultural products and services on the markets.

And then, it’s easier to think about value chain in practical terms. Let’s talk again about the theatre company. So, we have the author of a great playso there is a creative input. But it’s just a manuscript with text. Then you need someone who would… the theatre company that would make an interpretation of this text and produce a play. But in order to produce a play, that’s, let’s say, somewhere here, you need designers, you need set designers, you need lighting specialist, you need the whole set of people for the play to take place. And then what about the venue? Well, the venue should also be there, and it’s provided maybe by another organisationmaybe the theatre company rents this place.

So, we start with the manuscript, then we add all these value chain links and we add organisations that add value. Then we have the final product, and you might think: OK, this is it, that’s what consumers consume. No! Because we need to buy tickets in order to get to the theatre, and here you might have an online ticketing service, where you would actually buy tickets for your theatre play. It means they also add value to the customer because that’s how we want to buy tickets in order to see the performance. So, it means they are also part of the value chain. And we have here their artistic input, and then we have the cultural product at the end, and you see how many multiple players are assembled in the value chain and what is important when you pay for the price of the ticketall these actors should get their part because they do add value to the customer. And that’s, essentially, a sense of value chain.

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