Study on the creative industries value chain

Management Science and Research June 2013, Volume 2, Issue 2, PP.12-15

Study on the Creative Industries Value Chain Da Deng Business School, China University of Political Science and Law, Beijing, 102249, China dengdadengda@sina.com

Abstract As an emerging industry, creative industries provide high value-added, knowledge-intensive producer services and consumer services. Based on the value chain smiling curve, this paper has first proposed a wave curve which reflects the basic value chain of creative industries. The new value chain links is increased from 3 to 4 by adding a cultural resource conservation link, focusing on the two high value-added links-R&D and marketing. This study provides a basis to further enhance the added value of the industry.

Keywords: Service Economy; Creative Industries; Value Chain; Industrial Chain; Smiling Curve

1 INTRODUCTION The DCMS Mapping Documents in 1998 was first officially defined the creative industries as “those industries which have their origin in individual creativity, skill and talent as well as a potential for wealth and job creation through the generation and exploitation of intellectual property� [1]. In recent years, the development of creative industries in the scale and extent has become an important indicator of the level of a country or regional comprehensive competitiveness.

As an emerging industry, creative industries provide high value-added, knowledge-intensive producer services and consumer services. Based on the value chain smiling curve, this paper studies the basic value chain of creative industries, providing a basis to further enhance the added value of the industry.

2 A RESEARCH REVIEW Creative industries research is abroad mainly focused on such areas as definition, industry characteristics, creative class and creative cities. The most representative concept of creative industries came from two American scholars, Caves and Howkins, whose opinions on this subject are at opposite poles. Caves’ major delineation of this concept is inside the two areas, the arts and the media [2], while Howkins has a more broad definition, including copyright, patent, trademark and design industries, covering all aspects of science, engineering and technology sector [3]. The idea of the existence of a creative class is assumed as a determinant resource in territorial competitiveness with respect to its crucial role in the development and urban regeneration processes in many cities [4]. Geographic concentration is considered an important feature of creative economy [5]. Domestic researchers closely follow the progress of the latest research abroad, research from the perspective of the interpretation of the concept to the successful experiences and so on, and then gradually deepen and expand it. [6-7].

The concept of value chain was first proposed by Porter [8], referring to the process of value added activities between and within manufacturers for the production of the final transaction of the product or services. Value chain theory is that the core competitiveness of enterprises in the value chain is essentially on the advantages of a particular strategy, which completely subverts the traditional bucket theory.

To sum up, the current research on the creative industries has just started. Because of the different environment of the researchers, the creative industries do not have a universally acceptable concept. The research remains mostly qualitative phase analysis and the very few models quantitative analysis. There is little research on the value chain of creative industries.

3 BASIC VALUE CHAIN OF CREATIVE INDUSTRIES Value chain of creative industries as shown in Fig 1 contains the basic 5 parts. Whether in aspects of vertical or - 12 www.ivypub.org/msr

horizontal, the number of links determines creative industries that have a long span of chain.

Cultural Resources Preservation & Development

Content Creation

Production

Marketing & Promotion

Consumption

FIG 1 BASIC VALUE CHAIN OF CREATIVE INDUSTRIES

3.1 Cultural Resources Preservation, Collection and Arrangement Although as the foundation for the development of creative industries, the existing cultural resources needed for development can not be transformed into creative products naturally, but be re-created to the creative product form through the industrialized way - protection, development, collection and collation.

3.2 Content Creation Through innovative, creative products are transformed into products for people to meet the cultural consumption. This process is the core of the development of creative industries, which depends on the creativity of the main feeling of the unique cultural resources generated by creative inspiration, original and creative products. Market players involved in this part are the cultural content providers, of whom the key members are artists, designers, or any creative producer to create content. This link is on top of the creative industries value chain. These value-creating activities will take abstract, intangible products as part of the industrial chain, changing the previous concept of produce and manufacture.

3.3 Production, which Transform Creativity or Work into Products Creative enterprises produce innovative products in batches through technology process. Technical characteristics of creative industries also determine the high correlation of the industry. The rapid development of technology has led directly to all the upgrading of traditional art forms and modern updates, and outstanding performance for all types of digital creative industries has been accelerated. Technology has greatly extended the industrial chain of creative industries, also making them strong industry permeability and a wide range of industrial relevance with technical, business, creativity and culture.

3.4 Marketing and Promotion of Creative Products An original creative products need marketing by means of a certain channel or form of re-creation, thus completing the cultural and creative products industrial development. In the global consumer society, the creative product is no longer a product of creative genius burst of inspiration, but well-designed, planned results. Marketing and professional planning are very important in the creative industries value chain, of which the key members are agents, planners, brokers, intermediaries and producers, using various marketing model to transfer the value and function value to consumers. They understand the market, capable to accurately anticipate and seize the market, and can operate the economic and media way to the public.

3.5 Consumption The end of the entire value chain is consumers who play an important role in the marketing process, even of feedback and interaction with the entire value chain. To stimulate consumers’ new desire and potential purchase that is the market basis of new ideas, so the growing consumer demand for the creative industries will be the final decision part of value chain. In the new knowledge economy, daily changes require all aspects of the value chain to take innovative approaches, including the new market participants, the new profit model, industry chain cross and integration, and even major changes in the whole chain.

4

WAVE CURVE ANALYSIS

Value chain of creative industries has very significant value-added (mainly cultural added value) through the creative input. This section will use the wave curve to explain how the value-added activities occur.

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4.1 Fordism Industry Value Chain Curve In the industrial age, as the main form of Fordism, high added value was created in the production processing activities, much higher than the R & D and marketing stages. As industry value chain curve showed in Figure 2, the internal business of the entire production can create more profits and enhance competitiveness.

4.2 Smiling Curve - Modern Industry Value Chain With the arrival of the personal consumption Post-Fordism, knowledge economy has become the main economic development approach, and the labor costs have greatly increased in developed countries.

Thus, relying on multinational companies shifting production activities to low labor costs in developing countries, they carried out industrial restructuring and transformation to adjust the layout of international production, maintaining their competitive advantage on R&D, brand and global marketing, so that the R&D and marketing margins increased substantially. This U-shaped industry value chain curve shown in Figure 3 is vividly called the "smiling curve"[9], which notes R&D and marketing the largest value-added part, while the production processing adds least.

Valueadded

Valueadded

Value Chain

Value Chain

Production Activities R&D

Modern Enterprise Production Activities

Marketing

R&D

Production

Marketing

FIG 2 FORDISM INDUSTRY VALUE CHAIN CURVE FIG 3 SMILING CURVE - MODERN INDUSTRY VALUE CHAIN

4.3 Wave Curve-Creative Industries Value Chain In general, the industrial structure and knowledge content of products are the two main factors impacting industrial value added. Taking technology and cultural resources as the main input factors, high value-added creative industries locate in the top of the value chain, in which culture is an important source of innovative value-added. Culture softens the industry and adjusts the industrial structure; at the same time, it forms the concept value and brand value of the product, thereby enhancing value- added.

Therefore, based on the value chain smiling curve, this paper has first proposed a wave curve shown in Figure 4, which reflects the basic value chain of creative industries, emphasizing the following two points of view: 

The new value chain links have been increased from 3 to 4 by adding one link, focusing on a cultural resource conservation creative Industries important role in the value chain.



The new curve stressed the two end high value-added links of creative Industries - R&D and marketing.

5 CONCLUSIONS As a source of creative industries, ‘creative’ drives other value chains as content creation, production and marketing, bringing up one input-multiple output industry value chain. That is the value spread oriented, which is the core value of enterprises creation, spreading to the surrounding industries, forming long-term production capacity, expanding the value of output, through such forms as joint development, technology, or copyright transfer. Creative industries are of originality, with knowledge characteristics and a high degree of cultural contents which produce economic benefits from cultural and creative originality through scale and industry, and creativity as the core transforms the abstract culture directly into industries with high economic value.

Within the creative industries constitute a high degree of associated industries. Through integration and value-added industrial value chain, creative industries form a highly connected group within them through value-added chain integration.

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FIG 4 WAVE CURVE-CREATIVE INDUSTRIES VALUE CHAIN

Obviously, taking the creative industries as the backbone, a knowledge-based tertiary industry based on creative activity is by substances of low or non-polluting and high value-added industries, and high-cultural connotation of innovation-based industries. The development of this industry will turn the creative ideas into enormous economic, cultural, social wealth. It will be our best choice to promote the city and nation by building a resource-conserving society, to take an innovative path of sustainable development, to greatly enhance the city and national comprehensive competitiveness.

ACKNOWLEDGEMENT This research was supported by the China University of Political Science and Law Science Research Projects, research on the creative industries and creative class.

REFERENCES [1]

Creative Industries Mapping Document 1998 [Online], London: DCMS. Available at: http://www.culture.gov.uk

[2]

Caves R, Creative industries: contracts between art and commerce[M], Cambridge, Mass: Harvard University Press, 2000.

[3]

Howkins. J, The creative economy: how people make money from ideas[M], Allen Lane: The Penguin Press, 2001.

[4]

Florida R, The rise of the creative class[M], New York: Basic Books.

[5]

Landry C, The creative city: A toolkit for urban innovators[M], London: Comedia Earthscan, 2000.

[6]

Li Wuwei, Wang Ruzhong, Miu Yong, Supporting the development of creative industries to improve the comprehensive Urban competitiveness of Shanghai[J], Social Sciences Shanghai China, 2005(01). (Chinese)

[7]

Sheng Lei, Creative industry development of Beijing about strategic meaning, advantage and counter-measures[J], Social Science of Beijing, 2005(03). (Chinese)

[8]

Michael Porter. Competitive advantage[M]. Beijing: Huaxia Publishing House, 2003(Chinese)

[9]

Shi zhengrong, Acer recycling: create, grow and challenge[M], Beijing: CITIC Publishing House, 2005(Chinese)

AUTHORS 1Da

Deng, Ph. D in management, Associate Professor, works in the School of Business, China University of Political

Science & Law, Beijing, China. Teach Principles of Economics, Modern Economic Theory and Project Management as undergraduate, graduate and MBA courses. Major Field of study is creative industries and industry economy. A large number of Research results have been published, such as Project Management of Modern Cultural Industry, Beijing, China Machine Press, 2004, Creative industries Under national innovation strategy, Beijing, Culture and Art Publishing House, 2010

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