This PPT slide, part of the 159-slide Strategy Frameworks Manual PowerPoint presentation, presents a framework for understanding profit pools within an industry, specifically highlighting the computer industry as a case study. Profit Pool Mapping is introduced as a method to analyze the distribution of profitability across various segments of an industry. The slide outlines how to define an industry profit pool, equating it to total industry profits, which can be calculated through total industry sales multiplied by average operating margin. This approach emphasizes the importance of sales and operating margins at each stage of the industry’s vertical structure.
A visual display accompanies the text, illustrating how different segments contribute to total industry profit. The graphical representation categorizes industry players, such as microprocessors, software, peripherals, and services, showing their share of industry sales and corresponding profitability. The height and width of the blocks in the visual indicate the value added by each segment, with taller and thinner blocks representing higher value addition.
Key conclusions drawn from the analysis highlight that certain segments, particularly microprocessors and software, yield a significantly higher proportion of total industry profit. This suggests that companies operating in these areas may have more lucrative opportunities compared to others. The slide effectively communicates that understanding where profits are concentrated can guide strategic decisions for businesses looking to optimize their positioning within the industry. Overall, it serves as a valuable tool for executives aiming to identify profitable segments and make informed investment decisions.
This slide is part of the Strategy Frameworks Manual PowerPoint presentation.
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