Value creation.doc
Transcript of 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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