McGahan

Question 1

Industries change over time in four distinct trajectories;

Answer 1

radical
progressive
creative
intermediating

Moreover a firm’s strategy cannot succeed unless it is aligned with the trajectory of the industry.

Question 2

What are a company’s two threat to obsolescence?

Answer 2

1. Threat of core activities (profit-generating) becoming less relevant to customers/suppliers.
2. Threat of core assets (resources, knowledge, brand capital) becoming less able to generate value.

Question 3

Radical change

Answer 3

Both core activities and core assets are threatened.

Like disruptive innovation.

e.g. Travel industry in 1980s and 1990s - web enabled systems threatened travel agents assets and activities.

Conduct selective experiments in developing new assets. E.g encyclopaedias building online services, TV channels developing online channels.

Question 4

Progressive change

Answer 4

Neither core assets or activities are threatened. Incumbents have an incentive to preserve the status quo.

> > success generally comes from carving out a position and building resources and capabilities incrementally. Quick response to feedback.
e.g. Wal Mart

Innovators succeed because they have unique insights into driving efficiency.

Question 5

Creative change

Answer 5

Core assets are under threat but core activities (supplier/buyer relationships) are stable.

> > Companies must find ways to restore assts whilst maintaining supplier/customer relationships.

e.g. movie studios

Question 6

Intermediating change

Answer 6

Core activities are threatened, whilst core assets retain their value.

Usually occurs when buyers and sellers have more options because they have access to more/better information.

> > Companies must find unconventional ways to extract value from their core resources. Diversify/ sell assets.

e.g. Sotheby’s auctions - eBay has reduced the value of its matchmaking service, but its core asset of knowledge and ability to value art is intact.