Value migration
Encyclopedia
In marketing
, value migration is the shifting of value-creating forces. Value migrates from outmoded business model
s to business designs that are better able to satisfy customers' priorities.
Marketing strategy
is the art of creating value
for the customer
. This can only be done by offering a product
or service that corresponds to customer needs. In a fast changing business environment
, the factors that determine value are constantly changing.
Adrian Slywotzky
described value migration in his 1996 book.
The value chain
is the sum of all activities that add utility
to the customer. Parts of the value chain will be internal to the company, while others will come from suppliers, distributors, and other channel partners. A linkage occurs whenever one activity affects other activities in the chain. To optimize a value chain, the linkages must be well coordinated.
The calculation of value migration is more difficult than it would at first seem. Value is perceived by customers and, as such, is subjective. This is very difficult to measure so relative market value of the firm is used as a proxy. Relative market value (defined as capitalization
divided by annual revenue) is used as an indication of the firm's success at creating value.
Marketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
, value migration is the shifting of value-creating forces. Value migrates from outmoded business model
Business model
A business model describes the rationale of how an organization creates, delivers, and captures value...
s to business designs that are better able to satisfy customers' priorities.
Marketing strategy
Marketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
is the art of creating value
Value (marketing)
The value of a product is the mental estimation a consumer makes of it. Formally it may be conceptualized as the relationship between the consumer's perceived benefits in relation to the perceived costs of receiving these benefits...
for the customer
Customer
A customer is usually used to refer to a current or potential buyer or user of the products of an individual or organization, called the supplier, seller, or vendor. This is typically through purchasing or renting goods or services...
. This can only be done by offering a product
Product (business)
In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...
or service that corresponds to customer needs. In a fast changing business environment
Environmental scanning
Environmental scanning is one component of the global environmental analysis. Environmental monitoring, environmental forecasting and environmental assessment complete the global environmental analysis. Environmental scanning refers to the macro environment.The global environment refers to the...
, the factors that determine value are constantly changing.
Adrian Slywotzky
Adrian Slywotzky
Adrian J. Slywotzky is a consultant and author of several books on economic theory and management. Slywotzky graduated from Harvard College and holds a JD from Harvard Law School and an MBA from Harvard Business School...
described value migration in his 1996 book.
Three types
- Value flows between industries — example: from airlines to entertainment
- Value flows between companies — example: from CorelCorelCorel Corporation from the abbreviation is a computer software company headquartered in Ottawa, Ontario, that specializes in graphics processing, similar to Adobe Systems...
WordPerfectWordPerfectWordPerfect is a word processing application, now owned by Corel.Bruce Bastian, a Brigham Young University graduate student, and BYU computer science professor Dr. Alan Ashton joined forces to design a word processing system for the city of Orem's Data General Corp. minicomputer system in 1979...
to MicrosoftMicrosoftMicrosoft Corporation is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions... - Value flows between business designs within a company — example: from IBMIBMInternational Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
mainframe computers to IBM PC's with system integration
Three stages
- Value inflow stage — value is absorbed from other companies or industries
- Value stability stage — competitive equilibrium with stable market shares and stable profit margins
- Value outflow stage — companies lose value to other parts of the industry - reduced profit margins - loss of market share - outflow of talent and other resources
The value chain
Value chain
The value chain, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.-Firm Level:...
is the sum of all activities that add utility
Utility
In economics, utility is a measure of customer satisfaction, referring to the total satisfaction received by a consumer from consuming a good or service....
to the customer. Parts of the value chain will be internal to the company, while others will come from suppliers, distributors, and other channel partners. A linkage occurs whenever one activity affects other activities in the chain. To optimize a value chain, the linkages must be well coordinated.
The calculation of value migration is more difficult than it would at first seem. Value is perceived by customers and, as such, is subjective. This is very difficult to measure so relative market value of the firm is used as a proxy. Relative market value (defined as capitalization
Market capitalization
Market capitalization is a measurement of the value of the ownership interest that shareholders hold in a business enterprise. It is equal to the share price times the number of shares outstanding of a publicly traded company...
divided by annual revenue) is used as an indication of the firm's success at creating value.
See also
- Business modelBusiness modelA business model describes the rationale of how an organization creates, delivers, and captures value...
s - Competitive advantage
- Core competencyCore competencyA core competency is a concept in management theory originally advocated by CK Prahalad, and Gary Hamel, two business book writers. In their view a core competency is a specific factor that a business sees as being central to the way it, or its employees, works...
- MarketingMarketingMarketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
- Strategic managementStrategic managementStrategic management is a field that deals with the major intended and emergent initiatives taken by general managers on behalf of owners, involving utilization of resources, to enhance the performance of firms in their external environments...
- Active inertia