1. HOW INDUSTRIES CHANGE

2. NEED TO UNDERSTAND CHANGE IN INDUSTRY
Industry structure affects:
Profitability
Investors return
Change in industry structure determines the strategy to be followed at a particular period of time.

3. INDUSTRY EVOLUTION Industry Scale and Time Introduction/Pioneering
Growth
Maturity
Decline

4. Industry Life Cycle
Sales
Introduction Growth Maturity Decline
e Years

5. CORE ACTIVITIES & CORE ASSETS
activities that attract and retain suppliers and buyers and have historically generated profits for the industry
Core assets –
the resources, knowledge, and brand capital that make a firm more efficient at performing core activities and have historically made it unique.

6. CORE ACTIVITIES & CORE ASSETS
Banking:
Core activities: Receiving Deposits and Lending
Non-fee based activities
Core assets: Knowledge and resources needs to be updated ( Technology, consumers’ needs, brand etc.)
Photography :
Core activities: taking images
Core assets: knowledge and resources changed, technology changed ( digital ), storing, transferring, saving

7. THREATS OF OBSOLESCENCE
Core activities are threatened when they become less relevant to suppliers and customers due to some new outside alternative.
Core assets are threatened if they fail to generate value as they once did.

8. TRAJECTORIES OF INDUSTRY CHANGE
Radical :
Where both core activities and core assets are threatened
Progressive:
Where both core activities and core assets are not threatened
Creative:
Where core activities are not threatened but core assets are threatened
Intermediating:
Where core activities are threatened but core assets are not threatened

9. Threat of Obsolescence
Core Activities
Threatened Not Threatened
Threatened
Radical Change Creative Change
Core Assets
Not Intermediating Change Progressive Change

10. RADICAL CHANGE
Both the core assets and core activities are threatened by obsolescence.
About 19% of US industries went through this between 1980s and 1990s
Travel Business
Airlines enhancing a system of direct price competition and customers go for web-enabled systems

11. RADICAL CHANGE Relatively unusual
Industries often remain profitable for a long time
Exit strategy may not always be necessary.
PC and Main frame computer business
In the long run firms abandon their established position and move into emerging line of business
Typewriters and computers

12. PROGRESSIVE CHANGE
Both core activities and core assets are not threatened.
About 43 of US industries
Industries are more stable.
Progress and technology development occur but remaining within the exiting business framework
Firms try for distinctive position in the industry
Airline Business and Long route Travel Bus

13. INTERMEDIATING CHANGE
Core activities are threatened by obsolescence
but the core assets retain their value if used in new way.
32% of US industries
Most challenging for Firms
Firms need to restructure their relationship with the suppliers and customers while preserving their valuable assets.
Auto dealership

14. INTERMEDIATING CHANGE
Firms need to find unconventional ways to extract value from their core resources
Initial return may be high and then drop
Recording companies
Customer and the activities have changed but the core resource i.e. recording ability to develop new artist remain unchanged

15. CREATIVE CHANGE
Core assets are threatened but core activities remain stable.
About 6 % of Us industries
Pharmaceuticals
Develop new medicines, research etc but the procurement and marketing activities remain almost same
Oil and Gas exploration
New exploration ventures but maintain same relationship with the refineries and distributors.

16. CORE ACTIVITIES & CORE ASSETS
Music Industry:
Core activities: selling records and songs changed
Core assets: ability to develop new artists
INTERMEDIATING
Auto dealership:
Core activities: traditional way of selling changed due to internet
Core assets: Knowledge and brand remain same

17. CORE ACTIVITIES & CORE ASSETS
Pharmaceuticals
Core activities: Research and Development, test new drugs
Core assets: change in distribution and marketing skills
CREATIVE
Film Production:
Core activities: produce and distribution of films
Core assets: technology and knowledge changes

18. CORE ACTIVITIES & CORE ASSETS
Mail Delivery:
Core activities: way of delivering mails changed
Core assets: knowledge and techniques changed
RADICAL
Banking:
Core activities: Receiving Deposits and Lending
Non-fee based activities
Core assets: Knowledge and resources needs to be updated ( Technology, consumers’ needs, brand etc.)

19. WHICH TRAJECTORY ARE YOU ON?
Define your industry
Competition and 5% rule
(5% price fluctuation by one company causes suppliers and buyers to switch to another company – direct competitors)
Define industry’s core assets and activities
Core?
If it were eradicated today, will the profit decline?

20. WHICH TRAJECTORY ARE YOU ON?
Determine whether core assets and core activities are threatened with obsolescence.
Does the threat make core assets and activities irrelevant to profitability
Evaluate the phase of trajectory.
Industry change is a long run phenomenon