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o 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. Clarke for BM 499 Marakon Associates’s Approach to Corporate Strategy ? Consultants to many large corporations ? Coca Cola, HP, GM, CitiCorp, etc. ? Clients have returns % higher than industry peer group ? Goal is to increase shareholder value through analysis of economic profit ? Deep drilling in business data to measure value creation ? Product segments ? Customer se