Value creation.doc

8/14/2019 Value creation.doc

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LECTURE THREE: VALUE MIGRATION AND PROFIT POOLS

Subject Page

1. Value Creation 2

2. Value Migration 3

3. The Transitional Stages of Competitiveness 4

4. Profit Zones / Profit Pools 5

5. Summar !

". #is$ussion %uestions !

!. &eferen$es / &ea'ing (ist !

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1. Value Ceat!"#

)alters *2++2, suggests that the organisation-s value $hain e$ome merge' ith those

of other value $hain memers. 0n important feature is the role of information

management that provi'es a $oor'inating a$tivit. ther authors have ma'e

$ontriutions. f parti$ular interest is that of orman an' &amire *13, ho

suggest strateg is the art of $reating value6the a a $ompan 'efines its usiness

an' lin7s together ith onl to resour$es that reall matter in to'a-s e$onom8

7nole'ge an' relationships on an organisation-s $ompeten$ies an' $ustomers9.

The see the value $hain as an analti$al tool that fa$ilitates strateg 6strateg is

primaril the art of positioning a $ompan in the right pla$e on the right value $hain :

the right usiness; the right pro'u$ts an' mar7et segments; the right valuef the 'i' not; the are not ma7ing strategB the are simpl engaging in

usiness pro$ess re


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$. Value M!gat!"#

)alters *2++2, suggests value migration o$$urs as oth e$onomi$ an' sharehol'er

value flos aa from osoles$ent *an' osolete, usiness mo'els. Slot7 *1",

$ite' in )alters *2++2, argue that ne mo'els offer the same enefits to $ustomers

ut at loer $ost $hanging the mo'el stru$ture. This $hange often results in a

restru$turing of profit sharing throughout the usiness mo'el. ren *2++1, ?uotes

Shremp *CD; #aimler Chrsler, ho e=presses the vie8 6ithin 1+ ears the

pri$e of a $ar ill represent onl a ?uarter of the total value provi'e' to a $ustomer

ith the alan$e $onsume' in maintenan$e; finan$e an' other servi$es9.

Sheeh; Era$e an' Fraier *1", sho that value shifts over time. ver the $ourse

of the pro'u$t life$$le value pours into the in'ustr 'uring the intro'u$tion an'

groth stages. #uring the sha7eout stage; some value is lost; hoever it is maintaine'

over the longer term through etter $ompetition. #uring the maturit an' 'e$line

stages; value lea7s out of the in'ustr as the nee' for that pro'u$t has sin$e shifte' to

another more suitale pro'u$t or in'ustr. D=$hange value is usuall at its loest

'uring the later to stages of the pro'u$t life$$le; sin$e pro'u$ers are tring to e=it

the in'ustr.

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%. T&e Ta#'!t!"#al Stage' "( C")*et!t!+e#e''

Sour$e8 )alters *2++2,

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Prosumerism

Co


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-. P"(!t "#e' / P"(!t P""l'

Sour$e8 0'apte' from )alters *2++2,; Ga'iesh an' Gilert *1H, an' Slot7 an'

Morrison *1!,

>t is reasonale to suggest that profitailit 'uring ea$h stage of the value $hain

'iffers. Ga'iesh an' Gilert *1H, offer the $on$ept of a IProfit Pool-. Ease' upon

the notion that Su$$essful $ompanies un'erstan' that profit share is more important

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L"g!'t!c'

P"cue)e#t

Value

Del!+e0

Cu't")ea#1

Sta2e&"l1e

E3*ectat!"#'

Servi$e

De'!g#a#1

De+el"*)e#t

Ma2et!#g

J

ProfitZones

P

"1uct!"#


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than mar7et share9; a profit pool is 'efine' as the total profits earne' in an in'ustr at

all points along the in'ustr-s value $hain. The pool ma e I'eeper- in some

segments of the value $hain than in others an' variations ma e 'ue to the $ustomer;

pro'u$t an' 'istriution $hannel 'ifferen$es; or perhaps there ma e geographi$al

reasons.

Slot7 et al *1!, e$hoes this rationale 'esigning a profit e alloe' to ma7e a profit in this in'ustr@B an';

Ao shoul' > 'esign m usiness mo'el so that it ill e profitale@9

Ga'iesh an' Gilert *1H, 'efine the folloing approa$h to i'entifing an' mapping

profit pools8

#efine the pool8 'etermine hi$h value $hain a$tivities influen$e the

organisation-s ailit to generate profits; no an' in the future.

#etermine the sie of the pool8 'evelop a aseline estimate of the $umulative

profits generate' all profit pool a$tivities.

&e$on$ile the estimates8 $ompare the outputs of steps one an' to an' re$on$ile

here ne$essar.

Profit pools $an e use' to i'entif stru$tural options an' to ?uestion them in terms of

optimal sta7ehol'er value 'eliver. 0''itionall; e $an i'entif tren's; estalish

s$enarios an' i'entif here relationship strategies an' stru$tures nee' to e $hange'

an' to i'entif the finan$ial impli$ations of ea$h of the options.

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4. Su))a0

The 7e to e=e$uting su$$essful strateg is in un'erstan'ing the future an' ta7ing the

appropriate a$tions to profit from this un'erstan'ing. The notion of value migration

suggests that $onsumer nee's $hange ith time an' that $ompanies ho ish to sta

viale have to anti$ipate these shifts an' a$t a$$or'ingl. 0long ith these shifts

$ome $hanges to the profit profile of the value $hain. Profit pools $an e 'ire$tl or

in'ire$tl relate' to the value that $onsumers pla$e on an in'ivi'ual valuen'ustr-s

Profit Pool9; Aarvar' Eusiness &evie.

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