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    Value Migration

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    Asaf Rajput
    Value migration refers to the movement of value or worth from one part of a market to another over time. There are typically three stages: value inflow, value stability, and value outflow. As customer preferences change and competition increases, industries and companies experience declining sales and profits as value and resources migrate elsewhere. Industries can track value migration through metrics like market share changes and detect drivers through factors like policy shifts. Maintaining innovation leadership and customer satisfaction are important to remaining in the value stability stage.

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    Value Migration

    Uploaded by

    Asaf Rajput
    27 views22 pages
    Value migration refers to the movement of value or worth from one part of a market to another over time. There are typically three stages: value inflow, value stability, and value outflow. As customer preferences change and competition increases, industries and companies experience declining sales and profits as value and resources migrate elsewhere. Industries can track value migration through metrics like market share changes and detect drivers through factors like policy shifts. Maintaining innovation leadership and customer satisfaction are important to remaining in the value stability stage.

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    Value Migration (1)

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    Value migration refers to the movement of value or worth from one part of a market to another over time. There are typically three stages: value inflow, value stability, and value outflow. As customer preferences change and competition increases, industries and companies experience declining sales and profits as value and resources migrate elsewhere. Industries can track value migration through metrics like market share changes and detect drivers through factors like policy shifts. Maintaining innovation leadership and customer satisfaction are important to remaining in the value stability stage.

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    27 views22 pages

    Value Migration

    Uploaded by

    Asaf Rajput
    Value migration refers to the movement of value or worth from one part of a market to another over time. There are typically three stages: value inflow, value stability, and value outflow. As customer preferences change and competition increases, industries and companies experience declining sales and profits as value and resources migrate elsewhere. Industries can track value migration through metrics like market share changes and detect drivers through factors like policy shifts. Maintaining innovation leadership and customer satisfaction are important to remaining in the value stability stage.

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    of 22

    VALUE MIGRATION

    VALUE & MIGRATION – MEANING

    - Value
    - Worth or usefulness of something
    - Estimate the money’s worth

    - Migration
    - Movement of one part of something to another
    WHAT IS VALUE MIGRATION
    THREE STAGES OF VALUE MIGRATION

    - Limited Competition - Competitive Stability


    “ One of a Kind ” - High Growth - Stable Market Share
    - High Profitability - Stable Margins

    Market - Competitive Intensity


    - Declining Sales
    Value/Revenue
    - Low Profits

    !!! Resources and Customers leave


    at an accelerating rate !!!

    Value Inflow Value Stability Value Outflow “ Commodity ”


    WHY STAGES?

    • Stage 1 – Value Inflow – What is the business model that helps an organization to become
    profitable?
    • Stage 2 – Value Stability – What is the economic life of that business model?
    • Stage 3 – Value Outflow – What is the next business model as per the changing
    Customer’s preferences?
    Value Migration Status Of Companies

    Infosys
    12
    Wipro

    10

    6 Ranbaxy lab

    Dr.Reddy’s lab
    HDFC Bank
    4
    HLL

    Colgate ITC BAJAJ AUTO


    2 ONGC RIL Nirma
    GAIL SBI HPCL
    Hindalco HDFC ICICI BANK
    Hero Honda
    Tata Steel Telco SAIL IOCL
    0
    Conquest Zone Comfort Zone Vulnerable Zone
    MARKET VALUE / REVENUE

    2.5
    7.5

    0
    5
    10
    Infosys

    Wipro

    Dr.Reddy’s

    Ranbaxy

    HDFC Bank

    ONGC

    ICICI Bank

    Bajaj Auto

    Hero Honda

    MTNL
    VALUE MIGRATION

    TISCO

    SBI

    SAIL

    HPCL

    IOCL

    BPCL
    ACTIVITY: ON WHICH STAGE ARE THE SECTORS
    AT PRESENT

    • Airlines
    • Chemicals
    Market Share • Computing
    /Revenue • Entertainment

    Value Inflow Value Stability Value Outflow


    CAUSES OF VALUE MIGRATION

    - Technology
    - Cost
    - Convenience
    - Lowering of entry barriers
    - Lower switching costs
    - Easier access to capital
    - Innovation
    TYPES OF VALUE MIGRATION

    - Inter – country Migration (Indian I.T., Indian Pharmaceuticals)


    - Inter – industry within a Country (Railways to Airlines due to low cost and no frills)
    - Inter – company within an Industry (Public Sector Banks to Private Sector Banks,
    Telecom)
    - Inter – segment within a Company (Voice calling to Data calling within a telecom
    industry)
    #1 PUBLIC SECTOR BANKS TO PRIVATE SECTOR
    BANKS
    - Initiation of value migration since 1995 (LPG)
    - Value Migration Drivers – Efficiency, Technology
    - Catalyst to Value Migration Drivers:
    - Rapid Changing Technology
    - Public Sector Banks unable to match customer-friendly user interface
    - Unsustainable level of NPAs
    - Public Sector Banks lost 8% market share
    #2 100CC MOTORCYCLES TO PREMIUM
    MOTORCYCLES
    - References – Eicher Motors Limited, Bajaj Auto, Hero Motocorp
    - Value Migration Drivers – Changing Customer Priorities
    - Initially (1955) Royal Enfield failed to win Customers due to high price, maintenance cost
    and bad mileage, therefore CAGR was 10-12% compared to 55% at present
    - The market cap are as follows:
    Royal Enfield Hero Motocorp Bajaj Auto
    F.Y. 2010 17 bn 388 bn 292 bn
    F.Y. 2016 664 bn 675 bn 819 bn
    #3 INTERNATIONAL VALUE MIGRATION IN I.T.
    SECTOR
    - Reference – Infosys, HCL, TCS and Wipro
    - Value Migration Driver – Cost
    - Achievements:
    - 20x Growth in 15 years
    - Leadership Position in I.T. BPM solutions
    - Catalyst to Value Migration Drivers – Process Excellence, Cost Optimisation, Human
    Capital Leadership
    #3 INTERNATIONAL VALUE MIGRATION IN I.T.
    SECTOR

    Tabulation Computation (IBM)

    Specialised Business Integrated Business


    Design (Intel Design (DEC)
    Microsoft, DeLL, HP)
    #4 INTERNATIONAL VALUE MIGRATION IN
    INDIAN PHARMACEUTICAL SECTOR
    - Reference – Pharmaceutical Sector
    - Value Migration Driver – Cost, R & D
    - R & D spending is 8 – 10%
    - Production cost in India is 65% less than production in U.S. and 50% less than production
    in Europe
    - Inorganic route of growth
    - Avoiding Tapering in products, more on creating differentiated products
    ACTIVITY: WHERE HAS THE FOCUS OF TODAY’S
    INDUSTRIES SHIFTED TO?
    From To
    Revenue
    Product Power
    Technology
    Value of Market Share
    ACTIVITY: WHERE HAS THE FOCUS OF TODAY’S
    INDUSTRIES SHIFTED TO?
    From To
    Revenue Profit
    Product Power Customer Power
    Technology Business Design
    Market Share Value of Market Share
    HOW TO DETECT VALUE MIGRATION

    - Indications: (Even before the financial statements)


    - Market Share Movements – Indigo Airlines, Eicher Motors
    - Innovation Leadership – Asian Paints, Amazon
    - Customer Satisfaction – Decline of Public Sector Banks
    - Policy Changes – Aviation Industry, Power Industry
    ACTIVITY – IDENTIFY THE VALUE MIGRATION
    DRIVERS
    Sectors Drivers / Causes
    Banking / Insurance
    Pharmaceutical
    Information Technology
    Capital Goods
    Jewellery
    Cement
    Transportation
    Automobiles
    ACTIVITY – IDENTIFY THE VALUE MIGRATION
    DRIVERS
    Sectors Drivers / Causes
    Banking / Insurance Technology Efficiency
    Pharmaceutical R & D, Cost
    Information Technology Cost
    Capital Goods Preference for New Energy Sources
    Jewellery Trust in Brand
    Cement Cost, Demand Supply Equilibrium
    Transportation Convenience Cost
    Automobiles Technology
    REVERSE VALUE MIGRATION

    - Reverse value migration can be defined as the flow of value back to the point of its
    emanation.
    - For example, if value has migrated from industry A to industry B, then reverse value
    migration is the flow of value back to industry A.
    - Case studies
    -Value Migration from traditional FMCG to Ayurveda/Herbal players [Patanjali
    Ayurved]

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