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ies. 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. 3/23/2023 5 Darral G. Clarke for BM 499 Profit Pools: Company Examples Companies Automakers UHaul Elevators (OTIS) Harley Davidson Polaroid Core Business Auto manufacturing Truck Rental Elevator Manufacturing Motorcycles Instant Photography Cameras Sources of Highest ROI Auto leasing, insurance Packing materials, storage Service Accessories (consumer products), leasing, service, restaurants Film 3/23/2023 6 Darral G. Clarke for BM 499 Managerial Implications ? Focus on growth and market share can lead a pany to focus on unprofitable segments of an industry ? Today’s deep revenue revenue pool may be tomorrow’s dry hole. ? The goal should be to focus on profitable opportunities ? Industry should be considered more broadly than traditional definition ? 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 service 3/23/2023 7 Darral G. Clarke for BM 499 Turbulent industries ? Profit pools are especially important and useful in industries undergoing deregulation and/or technological change ? Such changes can open new profit pool opportunities and drain old ones ? Choke points may change or be eliminated ? Opportunities for either forward or vertical integration may emerge ? Current vertical integration may be disintermediated 3/23/2023 8 Darral G. Clarke for BM 499 Creating and managing a profit pool ? Profit pool analysis may indicate new opportunities or threats ? Imperatives ? Be open to a new perspective on your business and industry ? Developing new strategy may require overturning elements of the current strategy ? Be open to reevaluate the role played by current petitors ? Be vigilant to identify possibility that new entrants may seek to enter your industry with radical strategies 3/23/2023 9 Darral G. Clarke for BM 499 Looking Ahead: Profit Pools and the Five Forces ? Profit pools are puted by multiplying the size of the revenue by the unit profit margin ? Essentially an accounting process no theory ? Most valuable in situations in which external conditions are essential stable and/or unimportant ? (Often dominated by internal data alone) ? The five forces tells us (which will study next) ? the underlying determinants that determine both the revenue size and the unit profit margin ? The profit drivers which allow us to forecast the direction of change 3/23/2023 10 Darral G. Clarke for BM 499 Marakon Runners Thomas A. Stewart Fortune Sept. 28, 1998 3/23/2023 11 Darral G. Cla