ProfitPoolsandCoreCompetencenpu.pptx

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1、Profit Pools and Core CompetenceDarral G ClarkeProfessor of ManagementThe Marriott SchoolBrigham Young University2023/5/23 1Profit Pools:A Fresh Look at StrategyOrit Gadiesh and James L.GilbertHarvard Business ReviewMay-June 19982023/5/23 2THE PC INDUSTRYS PROFIT POOLn Value chain focusn Axesn Verti

2、caloperating marginn Horizontalshare of industry data40%30201000 100%share of industry revenuemicroprocessorsother componentspersonal computerssoftwareperipheralsservicesThe value chain for the PC industry includes six key activities;the profitability of the activities varies widely.Manufacturers co

3、mpete in the largest but least-profitable segment of the chain.2023/5/23 3 Darral G.Clarke for BM 499The Profit Pool Lensn The profit pool is the total profit earned in an industry at all points along the industrys value chainn Segment profitability may vary by customer group,product category,geogra

4、phic market,or distribution channeln Profit concentration may be very different than revenue concentrationn Shape of the profit pool reflects the competitive dynamics of a business Interactions of companies and customers Competitive strategies of competitorsn Product pools are not stagnant2023/5/23

5、4 Darral G.Clarke for BM 499THE U.S.AUTO INDUSTRYS PROFIT POOL100%operating marginsource:Harvard Business Review,May-June 1998auto rental25%1510500share of industry revenueauto manufacturingnew car dealersused car dealersauto loansauto insuranceaftermarket parts20leasingwarrantygasolineservice repai

6、rThe automotive industry encompasses many value-chain activities.The way that profits and revenues are distributed among these activities varies greatly.The most profitable areas of the car business are not the ones that generate the biggest revenues.2023/5/23 5 Darral G.Clarke for BM 499Profit Pool

7、s:Company ExamplesCompaniesAutomakersU-HaulElevators(OTIS)Harley DavidsonPolaroidCore BusinessAuto manufacturingTruck RentalElevator ManufacturingMotorcyclesInstant Photography CamerasSources of Highest ROIAuto leasing,insurancePacking materials,storageServiceAccessories(consumer products),leasing,s

8、ervice,restaurantsFilm2023/5/23 6 Darral G.Clarke for BM 499Managerial Implicationsn Focus on growth and market share can lead a company to focus on unprofitable segments of an industryn Todays deep revenue revenue pool may be tomorrows dry hole.n The goal should be to focus on profitable opportunit

9、iesn Industry should be considered more broadly than traditional definitionn Automobile industry includes Component manufacture and supply New car assembly and delivery New car warrantee and service New car financing and insurance Used car sales and service2023/5/23 7 Darral G.Clarke for BM 499Turbu

10、lent industriesn Profit pools are especially important and useful in industries undergoing deregulation and/or technological changen Such changes can open new profit pool opportunities and drain old onesn Choke points may change or be eliminatedn Opportunities for either forward or vertical integrat

11、ion may emergen Current vertical integration may be disintermediated2023/5/23 8 Darral G.Clarke for BM 499Creating and managing a profit pooln Profit pool analysis may indicate new opportunities or threatsn Imperativesn Be open to a new perspective on your business and industryn Developing new strat

12、egy may require overturning elements of the current strategyn Be open to reevaluate the role played by current competitorsn Be vigilant to identify possibility that new entrants may seek to enter your industry with radical strategies 2023/5/23 9 Darral G.Clarke for BM 499Looking Ahead:Profit Pools a

13、nd the Five Forcesn Profit pools are computed by multiplying the size of the revenue by the unit profit marginn Essentially an accounting process-no theoryn Most valuable in situations in which external conditions are essential stable and/or unimportantn(Often dominated by internal data alone)n The

14、five forces tells us(which will study next)n the underlying determinants that determine both the revenue size and the unit profit marginn The profit drivers which allow us to forecast the direction of change2023/5/23 10 Darral G.Clarke for BM 499Marakon RunnersThomas A.StewartFortuneSept.28,19982023

15、/5/23 11Marakon Associatess Approach to Corporate Strategyn Consultants to many large corporationsn Coca Cola,HP,GM,CitiCorp,etc.n Clients have returns 3.1%higher than industry peer groupn Goal is to increase shareholder value through analysis of economic profitn Deep drilling in business data to me

16、asure value creation Product segments Customer segments2023/5/23 12 Darral G.Clarke for BM 499How Strategy Happensn Learning where value is createdn Waterfall charts by product and customer segmentsn Evaluating strategyn Industry average profit per unitn Companys profit vs industry averagen Managing

17、 valuen Current strategyn Change product focusn Change customer focus2023/5/23 13 Darral G.Clarke for BM 499Learning where value is createdProduct segmentsCustomer segmentsProfit/loss($per unit)Volume(units)Volume(units)02023/5/23 14 Darral G.Clarke for BM 499Evaluating StrategyCompany profit per un

18、itIndustry-average profit per unit2023/5/23 15 Darral G.Clarke for BM 499Managing for valueCurrentstrategyChangeproductfocusChange CustomerfocusValue2023/5/23 16 Darral G.Clarke for BM 499Application to our casesn Retail industry(Wal*Mart)n Soft drink industry(Coca-Cola and PepsiCo)n Steel(Nucor)and

19、 aluminum cans(CC&S)n Hi tech(Intel,Cisco,and Dell)n Video games(Nintendo)n Web businesses(eBay and Yahoo!)2023/5/23 17 Darral G.Clarke for BM 499The Core Competence of the CorporationPrahalad,C.K.and Gary HamelHarvard Business Review,May-June 19902023/5/23 18Core Competencen A Firm is made up of re

20、sourcesn people,patents,brand names,plant&equipment,processes,etcn A competence is the ability to employ diverse skills and resources to perform tasks and activities.n A core competence is a broadly based and/or a broadly applied fundamental capability.2023/5/23 19 Darral G.Clarke for BM 499Competen

21、ce and Technologyn Competence is not the same as technologyn Competence requiresn technologiesn social organizationn collective learning2023/5/23 20 Darral G.Clarke for BM 499Core competence questions:n What are we really good at?n How can we build upon it?n What do we need to be good at?2023/5/23 2

22、1 Darral G.Clarke for BM 499Characteristics of Effective Competenciesn Durability:Technical equipment can be short lived.Reputation or knowledge may depreciate more slowly.n Transparency:The more complex the source of competence,the harder it is to imitate it.n Transferability:The availability of re

23、sources to competitors.n Replicability:A competitors internal ability to replicate a competence using available resources.2023/5/23 22 Darral G.Clarke for BM 499Choosing Competenciesn How central is this competence to our success in the market?n How long could we preserve our competitiveness in this

24、 business without this particular competence?n What future opportunities would be foreclosed if we were to lose this particular competence?2023/5/23 23 Darral G.Clarke for BM 499Core Competence and Core Products2023/5/23 24 Darral G.Clarke for BM 499A Hierarchy of Competencies2023/5/23 25 Darral G.C

25、larke for BM 499Building Strategy from CapabilitiesStrategyCapabilitiesResources1.Identify resources,appraiserelative strengths and weaknesses.Leverage use of resources2.Identify capabilities.What do we domore effectively than competitors?Identify resource inputs to capabilities.3.Appraise rent-gene

26、rating potential resources and capabilities in terms of:sustainable advantage,inappropriability4.Select strategy that best exploits the firms resources and capabilities rela-tive to external opportunities.5.Identify resourcegaps that need to befilled.Invest in replenishing,augmenting,and up-grading

27、the firmsresource base.CompetitiveAdvantageSource:Robert M.Grant,“The Resource-Based Theory of Competitive Advantage,”California Management Review,Spring,1991,page 151.2023/5/23 26 Darral G.Clarke for BM 499How to map your industrys profit poolOrit Gadiesh and James L.GilbertHarvard Business ReviewM

28、ay-June 19982023/5/23 27A straight forward exercise with complicationsn Concept is straight forwardn Define value chain activitiesn Determine their size and profitabilityn Application of concept is complicatedn Financial data doesnt correspond to value chain activitiesn Company data is aggregated ac

29、ross businessesn Products,customer purchases,channel volumes rarely match up with boundaries of an activityn Considerable creativity is required2023/5/23 28 Darral G.Clarke for BM 499Four step processn Define the pooln Determine the size of the pooln Determine the distribution of profitsn Reconcile

30、the estimates2023/5/23 29 Darral G.Clarke for BM 499Four step processDefine the pool Determine the size of the poolDetermine profit distributionReconcile the estimatesTask:determine which value-chain activity influence profits now and in the futureDevelop a baseline estimate of cumulative profits ge

31、nerated by all profit pool activitiesDevelop estimate of the profits generated by each activityCompare the outputs of steps 2&3GuidelinesTake a broad view of the value chain(beyond traditional industry definition)Seek a rough but accurate estimateShift between aggregation and disaggregation in your

32、analysisIf numbers dont add up,Check assumption and calculationsExamine industry from three perspective:own,other players,customersTake easiest route:go where the data areDo own economics first,then large pure players,large mixed,smallerCollect additional dataDont disaggregate more than necessaryTak

33、e at least two viewpoints:company level and product levelUse proxy measures where necessaryResolve inconsistenciesdont ignore themOutputProfit pool listEstimate of total pool profits,(range)Point estimate of profits for each value chain activityFinal estimates of activity and total pool profits2023/

34、5/23 30 Darral G.Clarke for BM 499What is“profit”anyway?n Can be thought of in three ways(all of which may be relevant for profit pool analysis)n Accounting profitn Return on investment Economic value added=after-tax operating profits cost of all invested capitaln Cash-flow Earnings before taking fi

35、xed-asset and capital costs into account2023/5/23 31 Darral G.Clarke for BM 499Example:Credit cards at RegionBankAcquisition Funding Servicing$80 value of a subscriber$279 average annual revenues per subscriber$60 annual payment to servicer per subscriber-$64 cost of acquiring a subscriber-$235 aver

36、age annual costs per subscriber$50 average annual cost to servicer$16 acquisition profit per subscriber$44 annual funding profit per subscriber$10 annual servicing profit per subscriber$3.20 annual acquisition profit per subscriber amortized over 5 year average lifeX260 million subscribers X260 X260

37、$800 million profit$11.4 billion profit$2.6 billion profit2023/5/23 32 Darral G.Clarke for BM 499RegionBanks Profit Pool Map100%acquisition funding servicingShare of industry revenue20%Operating margin2023/5/23 33 Darral G.Clarke for BM 499RegionBanks Profit Pool MosaicBanksShare of industry profitsacquisition funding servicingShare of activity profits100%100%BanksBanks2023/5/23 34 Darral G.Clarke for BM 499演讲完毕，谢谢观看！