| 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. Value migration is the shifting of
value-creating forces. Value migrates from outmoded business models to
business designs that are better able to satisfy customers' priorities.
Three types
There are three general types of value migrations:
- Value flows between industries - example: from airlines to entertainment
- Value flows between companies - example: from Corel WordPerfect to Microsoft
- Value flows between business designs within a company - example: from IBM mainframe computers to IBM PC's with system
integration
Three stages
There are three stages to value migration:
- 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 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 firms success at creating value.
The concept of value migration was first proposed by A. J. Slywotzky in his classic 1996 book Value Migration, How to think
several moves ahead of the competition, published by Harvard Business School Press.
See also:
Finding related topics
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