Final report hollywood cluster

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  • 1. 1 Hollywood Movie Cluster Analysis Hollywood Movie Cluster Analysis Ravi Kumar Joanna Zwirbulis Aleksey Narko Micha Goszczycki Eray Ersz Warsaw School of Economics Microeconomics of Competitiveness 237481-0622 (licensed by HBS)
  • 2. 2 Hollywood Movie Cluster Analysis I. Cluster Environment: US, California and LA 1. The United States economy and overall business environment The United States is considered to be the largest economy in the world with a GDP at purchasing power of 15.68 trillion and growth approximately 2.2% annually. The GDP growth rate has been changing significantly mainly due to the crisis that started in the U.S in years 2008-2009 and resulted in a enormous decline of GDP to negative 8.3% in 2009. However, the analysis of the GDP growth provided by the U.S Bureau Analysis of the Economy, suggests that the economy in the United States is gradually improving and in 2013 GDP growth rate expanded at the rate of 4.1%.1 GDP is comprised of three main sectors: services, industry and agriculture. The United States has one of the most diversified and most technologically advanced economies in the world. 40% of GDP is created by finance, insurance, real estate, rental, leasing, health care, social assistance, professional, business and educational services. Retail and wholesale trade account for another 12% of wealth, while the government related services involve 13%. Utilities, transportation, warehousing and information account for 10% of the GDP and manufacturing, mining, and construction constitute 17% of the output. Agriculture fuels only 1.5% of the U.S. GDP, yet due to the use of advanced technologies, the United States is a net exporter of food. Trading Economics. U.S Bureau of Economic Analysis. United States GDP Growth Rate. Available at 1
  • 3. 3 Hollywood Movie Cluster Analysis (U.S. Bureau of Economic Analysis)2 According to Global Competitiveness Index the U.S. is ranked 5th globally in years 2013-2014 and 7th in years 2012-2013. 3The US market counts nearly 317 million consumers, which makes it one of the largest markets in the world. Even though US population contains only 4% of the entire world population, its GDP accounts for 26% of the worlds total economic output. The United States dominates in wealth. One third of the world's millionaires and 40% of the worlds billionaires live in the United States, making it the wealthiest nation in the world.4 Being one of the richest and largest countries in terms of population, places the U.S. market in a very dominant position. In order to analyze the US economy, it is also necessary to mention its key sectors such as consumers, businesses, government, trade, labor and inflation. Even though they are all playing a significant role in US economy, consumer spending is a sector, which seem to have a major importance when speaking of the United States and its historical and current situation. Consumer spending makes up 70% of all spending in the US economy so an improvement in the economic and financial well - being of the households contributes to gains in the broader economy. According to Economic Forecast Industry Outlook 2013-1014 consumer spending on durable goods, especially cars and trucks over each of the past three years continued to grow by approximately 6%. Speaking of consumer spending in the US, it is also relevant to refer to Rostows Stages of Growth Model. According to the American economist, the 5th stage of growth model, called the age of high mass consumption perfectly summarizes the economy and the population of the United States and indirectly explains its competitive advantage in entertainment industries such as Hollywood movies. According to Rostows model, this type of economy is consumer oriented and dominated by services. Furthermore, there is a widespread and normative consumption of high-value consumer goods (e.g. automobiles) and typically consumers have disposable income, beyond all basic needs, for additional goods. Here, a country's economy flourishes in a capitalist system and is characterized by mass production and consumption. Historically, the United States is said to have reached the stage of high mass consumption first, followed by other western European nations, and then Japan in the 1950s. The U.Ss economy is considered to be the largest manufacturer in the world, producing a fifth of the US. Bureau of Economic Analysis. Available at: Global Competitiveness Report 2012- 2013. Available at: Global Competitiveness Report 2013-2014. Available at: 4 10 Largest Economies in the World. Available at: 2 3
  • 4. 4 Hollywood Movie Cluster Analysis entire world's manufacturing output. The largest manufacturing industries by revenue consist of steel, petroleum, aerospace, automobiles, telecommunications, chemicals, electronics, food processing, consumer goods, lumber, and mining. It is 3rd biggest oil producer and the second biggest natural gas producer. The U.S. exports totals $1.612 trillion and its imports equals $2.357 trillion. United States is also regarded to be one of the most influential and biggest financial markets in the world. More than half of the currency reserves around the world have been overwhelmingly invested in the U.S. dollar, as opposed to the euro. More than one-fourth of the 500 largest firms around the world have their main headquarters in the United States. The American economy is a free-market, private enterprise system that has only limited government intervention in areas such as health care, transportation, and retirement. American companies are among the most productive and competitive in the world. In 1998, 9 of the 10 most profitable companies in the world were American (even the non-U.S. exception, Germany's Daimler-Chrysler, has a substantial part of its operations in the United States). Unlike their Japanese or Western European counterparts, American corporations have considerable freedom of operation and little government control over issues of product development, plant openings or closures, and employment. The United States also has a clear edge over the rest of the world in many high-tech industries, including computers, aerospace, and military equipment. In the Global Competitiveness Report 2013-2014, the U.S. ranks as 7th best innovative market on the global scale. It is very strong in capacity for innovation (5th), companies spending on R&D (5th) and Universityindustry collaboration in R&D (3rd), availability of scientists and engineers (6th). 5 Despite its impressive advantages, the American economy faces a number of problems. Due to the financial crisis and the recession that hit the US market in 2008, the U.S. economy is still trying to recover, and in fact recovers very slowly. The areas that are still suffering include mostly: budget deficits, growing gap of inequality of wealth within the Americans, high unemployment rates, ineffective government, etc. 6 Despite signs of recovery and growth the US has not returned to pre-crisis labor-market performance. Despite rising employment growth and falling unemployment, the U.S., whose labor force of 155.6 million is the worlds third largest behind China and India, is still estimated to have 7.3% unemployment according to data from August 2013. The unemployment varies by state, however it is estimated that approximately 300,000 or more new jobs a month need to be created to bring unemployment down with the speed desired. Global Competitiveness Report 2013-2014. Available at: 6 What the Current Economic Outlook Means for American Families. Economic Outlook for 2013. Business&Money. January 16th 2013. 5
  • 5. 5 Hollywood Movie Cluster Analysis Source: Budget problems remain the most significant concerns to faster growth of the United States. Despite the fiscal cliff deal that reduced deficit almost $1.1 trillion last year, it had very small impact on recovery. Deficit still needs to be reduced by approximately $300 billion a year. This, however, means further spending cuts and tax hikes that will be a drag on the economy. The public debt constantly increases and in October 2013, reached the level of $17 trillion.
  • 6. 6 Hollywood Movie Cluster Analysis 2. The US Diamond Analysis To explain the national environment and competitive advantage of the United States, we use Porters Diamond. It consists of four main attributes, such as Factor and Demand Conditions, Supporting Industries and Firm Strategy & Rivalry that all together reflect the countrys strengths and weaknesses in comparison to other nations. The diamond helps to understand the framework for businesses creation and clusters development in the United States. However, it also summarizes the flows that impact the competitive advantage of the country. The numbers in the parenthesis explain the global rankings in the Competitiveness Report. Availability of the latest technology (6th) Infrastructure (15th) Availability of research and training services (9th) Geographical condition (climate and topography) Intense local competit