1、Profit Pools and Core CompetenceDarral G ClarkeProfessor of ManagementThe Marriott SchoolBrigham Young University2023-7-261Profit Pools:A Fresh Look at StrategyOrit Gadiesh and James L.GilbertHarvard Business ReviewMay-June 19982023-7-262THE PC INDUSTRYS PROFIT POOLnValue chain focusnAxesnVerticalop
2、erating marginnHorizontalshare of industry data40%30201000100%share of industry revenuemicroprocessorsother componentspersonal computerssoftwareperipheralsservicesThe value chain for the PC industry includes six key activities;the profitability of the activities varies widely.Manufacturers compete i
3、n the largest but least-profitable segment of the chain.2023-7-263The Profit Pool LensnThe profit pool is the total profit earned in an industry at all points along the industrys value chainnSegment profitability may vary by customer group,product category,geographic market,or distribution channelnP
4、rofit concentration may be very different than revenue concentrationnShape of the profit pool reflects the competitive dynamics of a business Interactions of companies and customers Competitive strategies of competitorsnProduct pools are not stagnant2023-7-264THE U.S.AUTO INDUSTRYS PROFIT POOL100%op
5、erating marginsource:Harvard Business Review,May-June 1998auto rental25%1510500share of industry revenueauto manufacturingnew car dealersused car dealersauto loansauto insuranceaftermarket parts20leasingwarrantygasolineservice repairThe automotive industry encompasses many value-chain activities.The
6、 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.2023-7-265Profit Pools:Company ExamplesCompaniesAutomakersU-HaulElevators(OTIS)Harley DavidsonPolaroidCore BusinessAu
7、to manufacturingTruck RentalElevator ManufacturingMotorcyclesInstant Photography CamerasSources of Highest ROIAuto leasing,insurancePacking materials,storageServiceAccessories(consumer products),leasing,service,restaurantsFilm2023-7-266Managerial ImplicationsnFocus on growth and market share can lea
8、d a company to focus on unprofitable segments of an industrynTodays deep revenue revenue pool may be tomorrows dry hole.nThe goal should be to focus on profitable opportunitiesnIndustry should be considered more broadly than traditional definitionnAutomobile industry includes Component manufacture a
9、nd supply New car assembly and delivery New car warrantee and service New car financing and insurance Used car sales and service2023-7-267Turbulent industriesnProfit pools are especially important and useful in industries undergoing deregulation and/or technological changenSuch changes can open new
10、profit pool opportunities and drain old onesnChoke points may change or be eliminatednOpportunities for either forward or vertical integration may emergenCurrent vertical integration may be disintermediated2023-7-268Creating and managing a profit poolnProfit pool analysis may indicate new opportunit
11、ies or threatsnImperativesnBe open to a new perspective on your business and industrynDeveloping new strategy may require overturning elements of the current strategynBe open to reevaluate the role played by current competitorsnBe vigilant to identify possibility that new entrants may seek to enter
12、your industry with radical strategies 2023-7-269Looking Ahead:Profit Pools and the Five ForcesnProfit pools are computed by multiplying the size of the revenue by the unit profit marginnEssentially an accounting process-no theorynMost valuable in situations in which external conditions are essential
13、 stable and/or unimportantn(Often dominated by internal data alone)nThe five forces tells us(which will study next)nthe underlying determinants that determine both the revenue size and the unit profit marginnThe profit drivers which allow us to forecast the direction of change2023-7-2610Marakon Runn
14、ersThomas A.StewartFortuneSept.28,19982023-7-2611Marakon Associatess Approach to Corporate StrategynConsultants to many large corporationsnCoca Cola,HP,GM,CitiCorp,etc.nClients have returns 3.1%higher than industry peer groupnGoal is to increase shareholder value through analysis of economic profitn
15、Deep drilling in business data to measure value creation Product segments Customer segments2023-7-2612How Strategy HappensnLearning where value is creatednWaterfall charts by product and customer segmentsnEvaluating strategynIndustry average profit per unitnCompanys profit vs industry averagenManagi
16、ng valuenCurrent strategynChange product focusnChange customer focus2023-7-2613Learning where value is createdProduct segmentsCustomer segmentsProfit/loss($per unit)Volume(units)Volume(units)02023-7-2614Evaluating StrategyCompany profit per unitIndustry-average profit per unit2023-7-2615Managing for
17、 valueCurrentstrategyChangeproductfocusChange CustomerfocusValue2023-7-2616Application to our casesnRetail industry(Wal*Mart)nSoft drink industry(Coca-Cola and PepsiCo)nSteel(Nucor)and aluminum cans(CC&S)nHi tech(Intel,Cisco,and Dell)nVideo games(Nintendo)nWeb businesses(eBay and Yahoo!)2023-7-2617T
18、he Core Competence of the CorporationPrahalad,C.K.and Gary HamelHarvard Business Review,May-June 19902023-7-2618Core CompetencenA Firm is made up of resourcesnpeople,patents,brand names,plant&equipment,processes,etcnA competence is the ability to employ diverse skills and resources to perform tasks
19、and activities.nA core competence is a broadly based and/or a broadly applied fundamental capability.2023-7-2619Competence and TechnologynCompetence is not the same as technologynCompetence requiresntechnologiesnsocial organizationncollective learning2023-7-2620Core competence questions:nWhat are we
20、 really good at?nHow can we build upon it?nWhat do we need to be good at?2023-7-2621Characteristics of Effective CompetenciesnDurability:Technical equipment can be short lived.Reputation or knowledge may depreciate more slowly.nTransparency:The more complex the source of competence,the harder it is
21、to imitate it.nTransferability:The availability of resources to competitors.nReplicability:A competitors internal ability to replicate a competence using available resources.2023-7-2622Choosing CompetenciesnHow central is this competence to our success in the market?nHow long could we preserve our c
22、ompetitiveness in this business without this particular competence?nWhat future opportunities would be foreclosed if we were to lose this particular competence?2023-7-2623Core Competence and Core Products2023-7-2624A Hierarchy of Competencies2023-7-2625Building Strategy from CapabilitiesStrategyCapa
23、bilitiesResources1.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-generating potential resources and capabilities in terms of:sustain
24、able 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 the firmsresource base.CompetitiveAdvantageSource:Robert M.Gran
25、t,“The Resource-Based Theory of Competitive Advantage,”California Management Review,Spring,1991,page 151.2023-7-2626How to map your industrys profit poolOrit Gadiesh and James L.GilbertHarvard Business ReviewMay-June 19982023-7-2627A straight forward exercise with complicationsnConcept is straight f
26、orwardnDefine value chain activitiesnDetermine their size and profitabilitynApplication of concept is complicatednFinancial data doesnt correspond to value chain activitiesnCompany data is aggregated across businessesnProducts,customer purchases,channel volumes rarely match up with boundaries of an
27、activitynConsiderable creativity is required2023-7-2628Four step processnDefine the poolnDetermine the size of the poolnDetermine the distribution of profitsnReconcile the estimates2023-7-2629Four step processDefine the poolDetermine the size of the poolDetermine profit distributionReconcile the est
28、imatesTask:determine which value-chain activity influence profits now and in the futureDevelop a baseline estimate of cumulative profits generated by all profit pool activitiesDevelop estimate of the profits generated by each activityCompare the outputs of steps 2&3GuidelinesTake a broad view of the
29、 value chain(beyond traditional industry definition)Seek a rough but accurate estimateShift between aggregation and disaggregation in your analysisIf numbers dont add up,Check assumption and calculationsExamine industry from three perspective:own,other players,customersTake easiest route:go where th
30、e data areDo own economics first,then large pure players,large mixed,smallerCollect additional dataDont disaggregate more than necessaryTake at least two viewpoints:company level and product levelUse proxy measures where necessaryResolve inconsistenciesdont ignore themOutputProfit pool listEstimate
31、of total pool profits,(range)Point estimate of profits for each value chain activityFinal estimates of activity and total pool profits2023-7-2630What is“profit”anyway?nCan be thought of in three ways(all of which may be relevant for profit pool analysis)nAccounting profitnReturn on investment Econom
32、ic value added=after-tax operating profits cost of all invested capitalnCash-flow Earnings before taking fixed-asset and capital costs into account2023-7-2631Example:Credit cards at RegionBankAcquisitionFundingServicing$80 value of a subscriber$279 average annual revenues per subscriber$60 annual pa
33、yment to servicer per subscriber-$64 cost of acquiring a subscriber-$235 average 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 su
34、bscriber amortized over 5 year average lifeX260 million subscribersX260X260$800 million profit$11.4 billion profit$2.6 billion profit2023-7-2632RegionBanks Profit Pool Map100%acquisition funding servicingShare of industry revenue20%Operating margin2023-7-2633RegionBanks Profit Pool MosaicBanksShare
35、of industry profitsacquisition funding servicingShare of activity profits100%100%BanksBanks2023-7-2634n树立质量法制观念、提高全员质量意识。23.7.2623.7.26Wednesday,July 26,2023n人生得意须尽欢，莫使金樽空对月。19:44:0619:44:0619:447/26/2023 7:44:06 PMn安全象只弓，不拉它就松，要想保安全，常把弓弦绷。23.7.2619:44:0619:44Jul-2326-Jul-23n加强交通建设管理，确保工程建设质量。19:44:
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37、4:0626 July 2023n好的事情马上就会到来，一切都是最好的安排。下午7时44分6秒下午7时44分19:44:0623.7.26n专注今天，好好努力，剩下的交给时间。23.7.2623.7.2619:4419:44:0619:44:06Jul-23n牢记安全之责，善谋安全之策，力务安全之实。2023年7月26日星期三19时44分6秒Wednesday,July 26,2023n相信相信得力量。23.7.262023年7月26日星期三19时44分6秒23.7.26谢谢大家！谢谢大家！n生活中的辛苦阻挠不了我对生活的热爱。23.7.2623.7.26Wednesday,July 26,2
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39、7月26日星期三下午7时44分6秒19:44:0623.7.26n让自己更加强大，更加专业，这才能让自己更好。2023年7月下午7时44分23.7.2619:44July 26,2023n这些年的努力就为了得到相应的回报。2023年7月26日星期三19时44分6秒19:44:0626 July 2023n科学，你是国力的灵魂；同时又是社会发展的标志。下午7时44分6秒下午7时44分19:44:0623.7.26n每天都是美好的一天，新的一天开启。23.7.2623.7.2619:4419:44:0619:44:06Jul-23n相信命运，让自己成长，慢慢的长大。2023年7月26日星期三19时44分6秒Wednesday,July 26,2023n爱情，亲情，友情，让人无法割舍。23.7.262023年7月26日星期三19时44分6秒23.7.26谢谢大家！谢谢大家！
